Cost basis of IRA when considering a Roth rollover

Forum|Forum|1 year ago
February 8, 2025
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If I have a cost basis in a Traditional IRA of $20,000 and those contributions never qualified to be a tax deduction on my Federal return in any of the years contributed, and the current value of said IRA is now $60,000, IF I rollover to a Roth, is the taxable amount $60,000 or $40,000?

Best answer by ThomasM125

$40,000 would be taxable. The $20,000 was from income you already paid taxes on so that is not taxable. The rest is since earnings on a traditional IRA or contributions you made from pre-tax income are taxable when distributed.

ThomasM125Answer

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taxchampAuthor

Thank you. That is what I thought, but I could not find it in the IRS database. Can you direct me to where it might be. Many thanks! And so quick too!!!

DianeW777

Yes. The Information can be found in the Form 8606 instructions as well as IRS Publication 590-B.

Basis. Your basis in traditional, traditional SEP, and traditional SIMPLE IRAs is the total of all your nondeductible contributions and nontaxable amounts included in rollovers made to these IRAs minus the total of all your nontaxable distributions, adjusted if necessary (see the instructions for line 2, later).

@taxchamp

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