dmertz
Level 15

Retirement tax questions

Since you mention Form 8606, presumably the distribution was from a traditional IRA.  Since you mention that the distribution was an RMD, presumably you still had money in traditional IRAs at the end of 2017.

Only a fraction of your RMD is nontaxable as a result of having $12,000 of basis in nondeductible traditional IRA contributions.  The portion that is nontaxable is calculated on Form 8606.  TurboTax automatically calculates the taxable and nontaxable portions of your distribution after you enter the Form 1099-R reporting the distribution, click the Continue button on the Your 1099-R Entries page, enter or confirm your $12,000 of basis, and enter your December 31, 2017 total balance in traditional IRAs.

For example, if your 2017 year-end balance was $190,000 and your distribution in 2017 was $10,000, your $12,000 of basis represents 6% of the $200,000 sum of your year-end balance and distribution.  This means that your $10,000 distribution was 6% nontaxable and 94% taxable.  Form 1040 line 15a of Form 1040A line 11a will include the entire $10,000 but line 15b or 11b will include only $9,400.  The basis remaining in your IRAs will be $11,400.  Your IRAs will always be part basis until all of your IRAs are entirely depleted.

See IRS Pub 590-B for more details:  https://www.irs.gov/publications/p590b#en_US_2016_publink1000230812

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