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Level 2
posted Jun 4, 2019 1:29:32 PM

In 2017, I contributed $5,500 to a Roth IRA and recharacterized to Traditional with a gain of $1,120. If i convert the Traditional ($6,620) back to Roth, taxable/penalty?

I'll add that I'd be ineligible to take a deduction on the Traditional IRA contribution. Perhaps it's best to leave as a non-deductible Traditional IRA contribution. Just looking for some help. Thanks in advance!

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1 Best answer
Level 15
Jun 4, 2019 1:29:33 PM

Your $5,500 nondeductible contribution gives you $5,500 of after-tax basis in your traditional IRAs.  If this is your only traditional IRA account, converting the entire account, $6,620, will result in the calculations on Form 8606 determining that $1,120 of your Roth conversion will be taxable and $5,500 will be nontaxable.  There is no penalty on a Roth conversion.

2 Replies
Level 15
Jun 4, 2019 1:29:33 PM

Your $5,500 nondeductible contribution gives you $5,500 of after-tax basis in your traditional IRAs.  If this is your only traditional IRA account, converting the entire account, $6,620, will result in the calculations on Form 8606 determining that $1,120 of your Roth conversion will be taxable and $5,500 will be nontaxable.  There is no penalty on a Roth conversion.

Level 2
Jun 4, 2019 1:29:35 PM

Thanks for the quick response!