<p>I had contributed to traditional IRA and wasn’t able to claim any tax deduction due to the fact that I had an employer sponsored 401(k). I had converted it to Roth in 2010. Should this amount be shown as income (please note, it was already taxed in the year of contribution)?</p>
<p>Thanks</p>
<p>If you made non deductible contributions to a traditional IRA, you will have what they call “basis” in the IRA. So if you contributed $5,000 and the IRA is now worth $6,000, only the increase over the basis is taxable and included in income. Your basis may even be higher than the value of the IRA depending on how well it did. </p>
<p>Keep in mind that the TOTAL value of ALL IRA’s are used to determine how much is taxable. So if you contributed $5000 to a non deductible IRA that is now worth $6000, but you also have another $14,000 in IRAs that were deductible, you can convert the $6K, but your basis is still only a quarter of that (5000/20000). If you convert the entire $20,000, you will pay tax on $15,000 of it.</p>
<p>Hope that was clear enough.</p>
<p>Thanks. That was clear. Luckily I only had non deductible contributions.</p>
<p>If you do your own taxes, please keep in mind that the conversion still needs to be reported on the return. Even if none of it is taxable.</p>