tax treatement when making withdrawal if non deductible | Ed Slott and Company, LLC

tax treatement when making withdrawal if non deductible

I have two members. Lisa made $140k. Rachel made $80k. Can either contribute to a Roth IRA or traditional and what is the tax treatment when they make withdrawals from the traditional if they can’t deduct the contributions today (assume withdrawals after the age of 79.5)?

If they are single, only Rachel can make a Roth contribution. Whether a TIRA contribution would be deductible or not depends on both their marital status and participation in an employer retirement plan. Either can make a non deductible TIRA contribution and file Form 8606 to report it. When distributions are taken, if there have been non deductible contributions reported on Form 8606, the non taxable amount of the distribution is pro rated using the amount of non deductible contributions as a pro rated share of the total TIRA adjusted year end balance.
 

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