daverusin

Thank you, that is very helpful!

In April 2025, my wife and I filed our federal income taxes for 2024, and she made an $8000 contribution to her traditional IRA (for 2024). Today I reviewed that return; our income had risen, and only $4420 of her $8K could be deducted, so instead TurboTax gave her a $3580 non-deductible contribution to her IRA. I believe it can stay there, and when she goes to withdraw the money, she has a $3580 basis on it, i.e. she will pay income taxes only on the gains. In practice this requires a lot of bookkeeping of regular and non-deductible contributions on form 8606. What a lot of work, potentially for decades, over a smallish error! Is there a way to put an end to the mix of tax types within the IRA , by making a withdrawal or Roth conversion or something? A related question: IRAs are property of an individual, not a couple, even though we are married-filing-jointly. On form 8606, we are told to add the value of all "your" traditional IRAs. Is that a singular or plural "you"? (My IRAs are surely confusing since I have rolled over some 403b money into them recently.)

I am a former employee of a public university of Illinois, now receiving retirement benefits. Ordinarily that would include health insurance benefits, but I took the option to opt out of receiving that benefit in exchange for a monthly cash incentive. This money is subject to Illinois and federal income tax, which suggests to me that it is treated as wages and salaries. I wouldn't especially mind paying the income tax, except that I live in Texas (which has no state income tax) and now find myself having to file Illinois income taxes, which is a paperwork headache. It would be very helpful if I could divert this "salary" into a 403b or similar plan, as I did while I was employed. (The opt-out incentive will disappear when I turn 65 in a few years, at which time I will want to start cashing in those very 403b and 457 accounts.) I am still trying to track down who in Illinois has the authority to tell me if this can be done or not, but I would like to find out whether it is at least within the framework of IRS rulings to do so, and if so, whether other benefits plans make this kind of arrangement possible. (That would give me some ammunition if I try to request that such a program be created in the Illinois system.) So ... is it considered normal to treat health insurance opt-out incentives for retirees as income that can be placed pre-tax in a retirement plan? dave