topic IRA basis with backdoor roth. in Retirement tax questions

IRA basis with backdoor roth.

cbasss6 — Thu, 15 Apr 2021 03:20:07 GMT

Hello,

I have been struggling with my IRA basis questions. This is my second year with a backdoor Roth IRA . My first year I put zero due to turbo tax telling me to if I have not filed a 8606 form before. Come this year I get the same question, but now I'm confused because I don't think it should be zero again because it's not my first year..

A little background: My first year i put 1.5 k into a nondeductible traditional IRA and convert it all of it to a roth. I ended up gaining 50, so I pay the taxes for that. My second year I put 6k into a nondeductible traditional IRA and then convert all of it (leaving the value of the traditional at zero) over to a roth right before the end of the year. The value of the traditional before I convert it is around 7k.

In this scenario, what is my total IRA basis?

Re: IRA basis with backdoor roth.

dmertz — Thu, 15 Apr 2021 12:06:08 GMT

If your 2019 year-end value in traditional IRAs was $0, your basis carried into 2020 is $0. All of your previous basis was distributed when you converted to Roth and reduced the taxable amounts of those conversions.

Re: IRA basis with backdoor roth.

cbasss6 — Fri, 16 Apr 2021 01:20:36 GMT

@dmertz

So is it safe to say if I continue this pattern of converting my traditional at the end of each year, leaving a value of $0. I will continue have a basis of $0?

If so, is basis only available if the traditional IRA has some value at the end of the year?

Re: IRA basis with backdoor roth.

ThomasM125 — Fri, 16 Apr 2021 19:52:14 GMT

You are correct, you will only have a basis in an IRA account if there is money in the account. The basis amount is the non-deductible portion of your traditional IRA account. Since you can make deductible and non-deductible contributions to a traditional IRA account, you could have a balance at the end of the year but have a $0 basis, if all the money in the IRA was from deductible contributions.