Traditional IRA Contributions to Non Deductible IRA | Ed Slott and Company, LLC

Traditional IRA Contributions to Non Deductible IRA

If someone contributed to a traditional IRA in 2018 and now realized they could not deduct the contributions, can the deposits be re-characterized as non-deductible or did this have to be done by April 15th? If it cannot be re-characterized, what has to happen to the dollars - do they come out of the IRA with earnings?

If the 2018 return was filed or an extension filed by 4/15, the contribution can be recharacterized as a Roth contribution if the income limits allow. If income is too high for a Roth, then the TIRA contribution can either be withdrawn with earnings or can simply be reported on Form 8606 as non deductible. If the 2018 return has been filed, the option chosen might require an amended return. If the contribution is returned with earnings, the earnings will be taxable in the year contributed (2018).   Best decision depends on several variables.


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