tax on IRA withdrawals

From: JONESW@CCSUA.CTSTATEU.EDU
Subject: tax on IRA withdrawals
Date: Thu, 11 Jun 1998 4:22:07 -0400

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R. A. Bauer asks how the tax on IRAs is calculated.

The tax-free percentage is the total of all non-deductible contributions
(from your 8606) divided by the total of ALL IRA holdings, whether those
IRAs came from regular ones or rollovers from 401k.

Example:  With $30,000 in ordinary IRAs, $10,000 non-deductible contribution
total listed on 8606, and $160,000 in rollovers from 401k, the tax-free
percentage is 10000/200000 = 5%.  So you pay income tax on 95% of whatever
you withdraw, REGARDLESS of whether it comes from the ordinary IRA or the
rollover.

The percentage has to be recalculated every year.

Bill Jones



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