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In 2008, I rolled over my wife's 401(k) of $40,000 into a traditional IRA. Then, she made non-deductible IRA contributions $5,000 per year for last 5 years or $25,000 into the same traditional IRA. In 2013, she converted the $25,000 of the $65,000 into a roth IRA. How do I determine the pro-rata share of what is taxable and what is not?


The BIDaWIZ Team's Answer:

You are correct that the $25,000 that you would like to convert will be pro-rated to include a taxable amount. Specifically, this is calculated by dividing the deductible IRA by the total value of all IRAs or $40,000/$65,000 and then by multiplying the amount converted or $25,000. The result is a taxable amount of $15,385 for the numbers you have provided. This is referenced in IRS Publication 590.

The BIDaWIZ Team



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