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Does IRA distribution calculation (in 8606) prefer to take the taxable amounts first over non-taxable?

I had 0 in my IRA (12/31/23). Then I contributed $8000 nondeductible. Then I converted $8012 to roth-ira and by end of 2024 I had $20. So total interest $32, but I had already moved $12 of it out to roth. 8606 line 13 (nontaxable distribution) shows $7980 and line 14 (basis) $20. I'd expect 8k non taxable distribution frankly and maybe 0 basis? Is this a TT or an 8606 artifact? Thanks
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dmertz
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

Does IRA distribution calculation (in 8606) prefer to take the taxable amounts first over non-taxable?

Your conversion is required to be a proportionate mix of nontaxable and taxable amounts, so the calculation performed on your Form 8606 is correct.  The nontaxable portion of your conversion is $8,012 * $8,000 / $8,032 = $7,980.  That leaves $32 of the $8,012 conversion taxable and $20 of basis remaining in your traditional IRAs.  Had you converted the entire $8,032 to Roth, that would have resulted in $8,000 being nontaxable and $32 being taxable.

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dmertz
Level 15
Intuit Approved! This answer has been verified for accuracy by an Intuit expert employee

Does IRA distribution calculation (in 8606) prefer to take the taxable amounts first over non-taxable?

Your conversion is required to be a proportionate mix of nontaxable and taxable amounts, so the calculation performed on your Form 8606 is correct.  The nontaxable portion of your conversion is $8,012 * $8,000 / $8,032 = $7,980.  That leaves $32 of the $8,012 conversion taxable and $20 of basis remaining in your traditional IRAs.  Had you converted the entire $8,032 to Roth, that would have resulted in $8,000 being nontaxable and $32 being taxable.

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