@Novahut wrote:
@KeshaH
Thank you very much for the detailed answer!
Yes, it makes a lot of sense like you said to "rollover the entire account balance for 2025." This actually is part of the confusion.
Following up on this "After the rollover, the $1,500 remaining balance will be made up of $500 deductible contributions and $1,000 nondeductible contributions.", where is this tracked for 2025 taxes? The actual funds (the original $1,500 pre-tax) will continue to be $1500 (+/- gains) on the bank statement (the year-end statement/Dec 2025 statement).
Another follow up, say we do "rollover the entire account balance..." and the $2000 non-d contributions, wouldn't form 1099-R show a total of $3500 amount. Only $500 should be taxed in this case (because the $1000 was taxed already). Or how does that scenario works?
Thank you very much!
@Opus 17 , thank you for your reply, and IRRA is just a type of IRA account (a rollover IRA-account)
IRRA is not a recognized term anywhere that I know of or can find. A rollover IRA is identical to an IRA for all tax purposes. If you have a traditional IRA, it doesn't matter how it was funded (contributions, or rollover from a previous plan), they are all considered "individual retirement arrangements".
The non-deductible basis of your IRA and your Roth conversions are tracked on form 8606. Your 2024 return will have a form 8606 showing the non-deductible contribution, the partial conversion, the calculation of the taxable amount, and the remaining non-deductible basis left in the traditional IRA.
If you do another Roth IRA conversion in 2025, you will use information from the 2024 form 8606 to prepare your 2025 tax return including a new form 8606 that documents the basis in your IRA, the conversion, and the calculation of the taxable amount.
