What's taxable in a traditional IRA to Roth IRA conversion?

Your taxable amount is determined after you enter:

1. All of your 1099-Rs and
2. Any IRA contributions here: Menu Path: Deductions/Credits > Common Deductions/Credits > IRA Contributions.

If you're converting a traditional IRA to a Roth IRA, you may or may not have taxable income to report with the conversion. This would depend on your earnings and any IRA deductions previously taken on your tax returns. If you didn't previously deduct the amount you're converting (when you put it into your traditional IRA), then that amount of original contribution won't be taxed in the conversion.

Example: You decide to convert your traditional IRA to a Roth IRA. Your traditional IRA had $6,700 in it at the time of conversion. This $6,700 came from a $6,500 traditional IRA contribution you made in a prior year and $200 in earnings while the money remained in the traditional IRA. When you originally contributed to the IRA, you took a $6,500 IRA deduction on your prior year return. When you make the conversion, your entire $6,700 will be taxable the year of the conversion because earnings are always taxed and the original $6,500 contribution amount was previously deducted on your return.

Example: You decide to convert your traditional IRA to a Roth IRA. Your traditional IRA had $6,700 in it at the time of conversion. This $6,700 came from a $6,500 traditional contribution you made in a prior year and $200 in earnings while the money remained in the traditional IRA. When you originally contributed to the IRA, you did NOT take any deduction for this contribution on your prior year return. Because you didn't take any deduction, $6,500 of your $6,700 will NOT be taxable when converted. Only $200 (your earnings) will be taxed when converted.