Question

Withdraw of IRA contribution that isn't deductible

Forum|Forum|3 years ago
February 5, 2023
1 reply
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In the process of filing my taxes and unfortunately didn't notice that I will be hitting the AGI limit with the IRA contribution to my wife's account and it isn't deductible. Had contributed $6000 to my wife's IRA account end of December 2022. Traditional IRA account currently still holds cash balance of more than $6000 i.e the contributed amount is technically not invested. Can the $6000 contribution without penalty from the account ? Or is it too much of hassle that I am better off leaving it in the IRA and file it as nondeductible IRA's form 8606. Any advice will be appreciated.

D

dmertz

Employee

Any investment gain or loss attributable to the $6,000 contribution is determined over the entire value of the IRA. Only if there was no net change in the value of the entire IRA between the time the $6,000 was deposited and the time the return of contribution is made with the return of contribution result in a distribution of exactly $6,000.

If the total balance in your wife's traditional IRAs is not much more than $6,000, it would make sense to keep the nondeductible traditional IRA contribution and do a Roth conversion of all of her traditional IRAs in 2023, leaving a year-end balance in traditional IRAs of zero.