Deductions & credits

TurboTax is showing $7,979 as taxable because it hasn’t connected your 1099-R (the conversion) to your nondeductible basis, the $14,000 you contributed.

To sort this out, enter your 2024 and 2025 contributions separately. This lets the software know that $14,000 of what you moved was already taxed.

1. Go to Deductions & Credits > Retirement and Investments > Traditional and Roth IRA Contributions. 
2. Check the box for Traditional IRA.
3. Enter $7,000 as your 2025 contribution.
4. Answer "No" to "Did you change your mind and recharacterize?" 
5. On the screen "Choose Not to Deduct IRA Contributions," select Yes, make part of my IRA contribution nondeductible. Enter $7,000.

Continue through the IRA interview until you see a screen asking: "Any Nondeductible Contributions to Your IRA?" or "Did you have any nondeductible contributions to your IRA from 2024 or prior years?" Select Yes. Then enter Enter $7,000 as your "Total basis as of December 31, 2024." If you already filed your 2024 return, this number should match Line 14 of your 2024 Form 8606.

Now that the software knows you have $14,000 in "basis," go back to your 1099-R:

1. Go to Wages & Income > IRA, 401(k), Pension Plan Withdrawals (1099-R).
2. Edit your 1099-R.
3. After entering the form, you’ll reach a screen asking "What Did You Do With The Money?"
4. Select "I moved it to another retirement account."
5. Then select "I converted all of this money to a Roth IRA."

Now, your taxable amount should be $979 because and recognize the $14,000 was a basis and none of it should be taxed.