DavidD66
Expert Alumni

Retirement tax questions

The amount of your distribution that is taxable is distribution amount x the taxable percentage of your total balance.  Your taxable percentage is determined by subtracting the after tax contributions you made to the IRA from the total balance.  For instance, if you made $60,000 of after tax contributions, your total balance is $900,000, and you take a $30,000 distribution, then your taxable portion is:

 

$30,000 x ($900,000-$60,000)/900,000 = $27,900

or $30,000 x 0.93 ($840,000/$900,000) =$27,900

 

You should be calculating this and reporting it on Form 8606.  If you didn't file Form 8606 in the years you made after tax contributions, that could cause a problem.  You can file Form 8606 by itself, and after the fact, so I recommend you file a Form 8606 for any prior year you made an after tax IRA contribution and did not file Form 8606.

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