I withdrew $55000 from my traditional IRA. I am required to do form 8606. Doing this, my taxable amount is only about 60% of my withdrawn amount. Should it not be 100%??

[Phillip1 · Accepted solution]

You are required to use Form 8606 if you have either made nondeductible contributions to a traditional IRA, taken a withdrawal from a traditional IRA with basis (you've made nondeductible contributions), converted a traditional IRA to a Roth IRA, or taken early Roth IRA distributions.

If you are using Form 8606 for a traditional IRA withdrawal, the form is calculating an amount that is tax free due to prior nondeductible contributions (this is treated as cost basis in a traditional IRA). In this situation, the nondeductible contributions are applied against the total value of all your traditional IRA accounts for a percentage of the traditional IRA withdrawal that is tax free. Generally, traditional IRA withdrawals from IRAs with basis are never 100% taxable.