Pension Rollover

[Myunk9]

I did a direct rollover of my old state pension to a traditional IRA. The pension had pre and post tax contributions. They said they could only issue one check but did give me the breakdown between the two amounts. Will I be able to reduce my taxable income by the $4,000 in post tax contributions because it was rolled over into a traditional IRA?

[VolvoGirl]

Well none of the rollover will be taxable.  So that's good and not a problem.  But the post tax amount needs to be kept separate.  I'm not sure how that should work.  I'll page @dmertz 

Did they take any tax withholding out of it?  

[Myunk9]

There were no withholdings. I figured it wouldn't be taxed as the whole amount went to a traditional rollover IRA. I'm just not sure what the effect is of the post tax amount going into a pre tax account. I was hoping it would reduce my taxable income when I file my 2024 taxes.

[VolvoGirl · Accepted solution]

No it's not going to reduce your income for 2024.  It is not a new contribution to the IRA.  It will reduce your income when you take a distribution from the IRA.  The distribution will be prorated between pre-tax and post tax amounts.  

[dmertz]

The post tax portion rolled over to the traditional IRA has become basis in nondeductible traditional IRA contributions.  When you eventually take a distribution from your traditional IRAs or otherwise be required to file Form 8606, you'll need to include this basis on Form 8606 line 2 with an explanation that this is basis rolled over from the 401(k).  TurboTax allows you to make this entry by clicking the EasyGuide button when making entries related to your traditional IRA contributions and distributions.

[Myunk9]

Thank you both for your assistance!