Questions and Answers
If an individual made deductible contributions to one traditional IRA and nondeductible contributions to another traditional IRA, can he/she convert only the nondeductible IRA to a Roth IRA and avoid paying tax on the deductible IRA balance?
A traditional IRA-to-Roth IRA conversion is subject to the general IRA distribution rules. The amount withdrawn is prorated based on pretax (deductible contributions and IRA earnings) and after-tax (nondeductible contributions) assets. Therefore, no one can convert only his/her aggregate nontaxable assets. An IRA owner should review IRS Form 8606, Nondeductible IRAs, and its instructions and discuss taxation of conversions with his/her income tax professional.
(Posted: 01/02/2008)
