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bigbear372
Returning Member

Question about tax basis for early IRA distribution

I had an early IRA distribution this tax year I used for a 1st home purchase in PA.   All contributions into that IRA were from a rollover from many years ago when I moved into PA.  The contributions were from other retirement plans when I worked in Maryland.  So none of those contributions were earned in PA.   Does that make my basis 0 based on what it says in turbotax?    See here.   "If you put the money into your retirement account while living or working in another state the amount contributed may have been contributed pre-tax and would not be considered in your PA basis calculation."

6 Replies
DavidD66
Expert Alumni

Question about tax basis for early IRA distribution

Your basis is zero, if the contributions were pretax payroll contributions, or after tax IRA contributions.   

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bigbear372
Returning Member

Question about tax basis for early IRA distribution

What if the majority of the roll over into the IRA that I withdrew from was from gains? 

dmertz
Level 15

Question about tax basis for early IRA distribution

Because you can change investments within a traditional IRA and transfer between traditional IRAs at any time without any tax consequence, funds in a traditional IRA are not attributable to any particular method by which the funds came to be in the traditional IRA.  They are all treated the same.

bigbear372
Returning Member

Question about tax basis for early IRA distribution

I'm still at a bit of a loss on this.  So from what I understand I need to figure out what the original contributions to my former employer retirement plans were, both on my end and their end (if any) from many years ago in Maryland.  If the contributions were pre tax then my basis will be zero?  But if they were roth (already paid tax in MD) on them it would still be zero right?  PA won't tax employer contributions either right so any of those contributions would not count towards the taxable amount either correct?    I mentioned earlier that a large portion of what I rolled over into this IRA I took a distribution from was from gains, so not money I put in to the original accounts but this does not matter?  What about the "Cost Recovery Method" Do i need to take that into consideration?    This is starting to be a little more complicated than I bargained for 😛 

bigbear372
Returning Member

Question about tax basis for early IRA distribution

Ok I think I have this figured out for the most part other than 1 aspect.    As far as i can tell I will use the cost recovery method to determine my basis for the distribution.  From what i understand PA will not tax up to how much I contributed into the plan and anything over that amount being withdrawn is subject to being taxed.  Now the last question I have, do you count employer match contributions along with your contributions or are those not to be considered as "your contributions" and not count in the calculation for the cost recovery method? 

bigbear372
Returning Member

Question about tax basis for early IRA distribution

Thanks to everyone for their help, I think i have it all figured out.  I was making it a little more complicated than it needed to be.  Simply if it was already taxed then it would count towards the basis and if not then it would not count towards the basis using the cost recovery method 

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