IRA Rollover

Archive for November, 2006

Question: When converting from a Rollover IRA to a Roth IRA, is the money from the 401k Rollover non deductable?

I’m doing my taxes and I’m wondering if any of the money in the traditional IRA I converted to a Roth IRA in 2005 is treated as a non deductable conversion. $1,400.00 was rolled over from a former employer 401k into a rollover IRA in 2002. Is this money treated as non deductable or do I have to pay tax for conversion purposes to the Roth IRA on this portion of the total amount I converted as well?

Answer: What you need to figure out is whether any of the original contributions to the 401k were after tax dollars. If they were, they would not be taxable on the Roth conversion. Your 401k statement will usually seperate pre and after tax contributions. If all of the contributions to the original 401k were pretax dollars than the total amount of the conversion is taxable in the year of the conversion.

Traditional or Roth IRA?