Are the earnings of a partial Roth recharacterization to a NON deductible IRA taxable?

[mercedes-ho]

I over contributed to a Roth IRA on 2017 so I recharacterized the excess plus earnings to a Tradional IRA before filing taxes.  I understand the reporting on 8606 but still can’t find the answer about the tax consequence for the “distribution/earnings” of the recharacterized amount or how to report it without the 1099-R.

[dmertz]

The recharacterization distribution is never taxable.  Earnings that must be transferred to the traditional IRA simply become earnings in the traditional IRA which will be taxable when later distributed or converted.

There is no such thing as a nondeductible traditional IRA, only basis in nondeductible traditional IRA contributions that apply to all of your traditional IRAs in aggregate.  The amount recharacterized becomes basis in nondeductible traditional IRA contributions and, as I said above, the earnings transferred along with the amount recharacterized become traditional IRA earnings.  The code N or R Form 1099-R reporting the recharacterization reports the amount transferred, not the amount recharacterized, so you explanation statement required to be included with your tax return must provide the details as to how much was recharacterized and how much was earnings.

[mercedes-ho]

Thanks dmertz! So if I include the explanation in 2017 tax return, do I need to do anything with the1099-R for this transaction in 2018 tax return?

[dmertz]

No. The explanation of the recharacterization included with your 2017 tax return will suffice.

[mercedes-ho]

Thanks again!  This is the most helpful answer I have gotten.