Correct Non-Taxable Amount for Roth Conversion (Line 13 of 8606-T)

[BroncoVegas]

I contributed $8k to my traditional IRA and it's listed as non-deductible, but I converted close to $20k to my Roth IRA.  Line 13 of the 8606-T is showing around $3k.  I was expecting $8k non-taxable and $12k taxable.  Can anyone help me understand the big difference?

[MaryK4 · Accepted solution]

The taxable amount of your Roth IRA conversion is applied pro-rata based on the total nondeductible contributions in all traditional IRA accounts.  See Worksheet 1-1. Figuring the Taxable Part of Your IRA Distribution.  

[BroncoVegas]

@MaryK4  Thank you!  I've realized that line 4 of the worksheet (year end value of traditional IRA) is very high because in addition to my non-deductible contributions, I also had a pension plan rollover into my traditional IRA.  I'm converting all of my non-traditional contributions and some of the rollover and as a result, the non-taxable portion is just 16%.  Is this correct?  Should I seek advice to deal with this somewhat unique situation?

[RogerD1]

If you did the worksheet in the link MaryK4 gave you, did the 16% taxable amount come out using that worksheet?  It's very difficult for us to know exactly how much would be non-taxable, but given that most traditional IRA accounts are mostly or all tax deferred contributions, that 16% figure may not be far off.

If you did such a large conversion, it may be worthwhile to hand off your taxes to one of our experts given the tax liability of such a large amount of taxable income.  Check out TurboTax Full Service - we also have local offices in some locations - that link will have details about those.