non-deductible conversions

[Guest jhenry]

If I have made non-deductible contributions to a regular IRA, are they eligible for conversion to a Roth? If so, any complications?

[Appleby]

Yes,

You may convert non-deductible IRA assets.

However, it is important to note that you cannot designate any part of the converted amount as attributable to the non-deductible portion, unless you file IRS form 8606, which will provide you with this information…according to the IRS, for purposes of determining the taxable portion of your IRA distribution ( or conversion), when you make non-deductible contributions, all your IRA balances are treated as one IRA. All these balances must be used in the computation, For example.

IRA balance 1= $10,000 (deductible)

IRA balance 2=$2,000 (non-deductible)

You convert $1,000 from IRA balance #2. To determine the taxable portion of the $1,000, you must combine the balances of both IRAs. The taxable portion may be $900 (approximately). Use this form to make the exact determination. The link the instructions are also provided

http://ftp.fedworld.gov/pub/irs-pdf/f8606.pdf

http://ftp.fedworld.gov/pub/irs-pdf/i8606.pdf