Hi, my spouse and I are filing jointly this year. I have earned income and my spouse does not. Both of us contributed $6000 each to traditional IRA and then converted to Roth IRA (total we contributed $12000).
Since my income exceeds the limit for tax-deduction, all of our contributions are not tax-deductible. I am assuming all of the $12000 contributions are not taxable as well since we are using post-tax dollars to contribute. However, the turbo tax shows that $6000 out of $12000 contribution is taxable.
Can someone help me navigate this issue? Thanks a lot.
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After investigated a bit, I found that the issue is that I wrongly enter 6000 in "Outstanding Rollovers" ("Enter any outstanding 2020 rollovers and recharactizations that were not completed until 2021") for both of us in "Wages & Income" section. I thought it was about how much we rollover to Roth IRA.
Anyway, problem solved. Thanks for the help.
Where do you see the contribution as taxable?
I assume that you have at least $12,000 of taxable compensation in order to make the contributions.
(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax and any self employment plan contributions, but can include commissions, certain alimony and separate maintenance, and nontaxable combat pay ).
Yes my AGI income is way above $12000.
Turbotax says it is taxable in both deduction page and Federal Review page.
In Deduction Wrap Up step, see image
In Federal Review page, "...your taxable IRA distributions of $6,000..."
After investigated a bit, I found that the issue is that I wrongly enter 6000 in "Outstanding Rollovers" ("Enter any outstanding 2020 rollovers and recharactizations that were not completed until 2021") for both of us in "Wages & Income" section. I thought it was about how much we rollover to Roth IRA.
Anyway, problem solved. Thanks for the help.
AGI does not matter, Taxable "compensation" does. That is W-2 wages or net self-employed income usually.
However, you screenshot suggests that perhaps when entering the IRA contributions both were entered for the same spouse.
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