your withdrawals will be taxed as ordinary income in the year of the distribution. But if you also made after-tax contributions, determining the taxable amount of your distributions may not be that simple, especially if you have multiple IRAs. In that case, the pro-rata rule must be used t...
It is important to understand the Pro-Rata rule for IRAs – which comes into play when you have both deductible and after-tax contributions in your Traditional IRA account. As you take distributions from the account, each distribution is treated as partly taxable and partly non-taxable, in pro...
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Beware the pro-rata rule on conversions If you have traditional IRA accounts with deductible contributions, you’ll need to factor that in if you convert any nondeductible amounts into a Roth IRA. You’ll need to follow the IRS’s pro-rata rule, which forces you to calculate the tax cons...
But it’s not exactly that simple. Your withdrawals will be subject toIRS Pro pro-rata rules, and they’re pretty complicated. Basically, you’ll be able to withdraw your non-deductible contributions tax-free, but not all at once.The pro rata rules will require that the non-deductible por...
I’m somehow doubting the IRS will consider the separation without applying the pro-rata rules. It may depend on how the IRA trustee reports the rollovers. If the pretax contribs are one distribution, and the after tax are another – and it’s clearly noted – it may work. But talk ...
Summary of the final RMD rules for ineligible beneficiaries. When the original IRA ownerhas begun taking RMDs, the beneficiary must take RMDs“at least as rapidly” – pro rata over 10 years– as the IRA owner had been. In the event there are assets remaining at the end of 10 years, th...
2Pro rata rules may apply. See IRS Notice 2014-54 for more. 3If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties.Which...
All Mixed Up: If you roll over after-tax contributions to an IRA, beware the pro rata rule.(Individual Retirement Accounts)Slott, Ed
Solo 401(k) plans allow you to do a backdoor Roth without encountering issues with the pro rata rule. Making tax-deferred contributions to a SEP IRA, on the other hand, essentially makes one ineligible for a tax-free backdoor Roth conversion. To complete a tax-free backdoor Roth contribut...