IRA deduction

Forum|Forum|3 years ago
April 7, 2023
5 replies
8 views

Do I need to enter our contribution amounts in TurboTax if we don't qualify for deduction? If I put zero, that seems like I'm lying.

Not A Product Question

MarilynG

Level 15

You should enter your Non-Deductible IRA Contributions, since they are reported and tracked on Form 8606.

Reporting them saves you money down the road. That’s because no individual’s money is supposed to be subject to federal income tax twice.

Form 8606 gets it “on the record” that a portion of the money in your IRA has already been taxed. Later on, when you take distributions, a portion of the money you get back will not be subject to income tax.

Here's more info on Form 8606.

@CubsfanInNC

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

CubsfanInNCAuthor

Level 2

Thanks. However in this situation, it's not after-tax dollars. I put in estimate numbers and we get $0 deduction. So do you think I need to find the real numbers if it doesn't affect our tax amount? or leave blank?

ErnieS0

Level 15

Yes. Enter your actual contribution even if you don’t get a deduction. As Tax Expert @MarilnG1 says, TurboTax will put your after-tax basis on Form 8606. That shows IRS you contributed after-tax money so your withdrawals won’t be 100% taxed when you retire.

If your contributions are nondeductible, consider recharacterizing them to a Roth IRA (assuming you are under the income limits). A Roth generally offers more advantages than a nondeductible traditional IRA contribution because your earnings are tax-free upon withdrawal.

With a nondeductible traditional IRA, only your after-tax contributions are tax-free.

You can recharacterize until you file your tax return. If you file an extension, you have until the extension deadline.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"