What Is a Roth IRA Basis?

The total amount that you’ve contributed to your Roth IRA over the years is considered your Roth IRA basis. Because Roth IRA contributions are not deductible in the year that you contribute them, you can withdraw your contributions at any time without tax or penalty.

Is a Roth IRA Basis Different From a Traditional IRA Basis?

Calculating your Traditional IRA basis is a bit different than calculating your Roth IRA basis. Understanding these differences in large part comes down to understanding what an IRA is and how various types of IRAs work.

What Are the Rules of a Roth IRA Basis?

Contributing to a Roth IRA can be a great way to invest and save for retirement, because your earnings and withdrawals are tax-free, as long as you make qualified distributions. Your Roth IRA basis is easy to calculate, since it’s the net total of any contributions that you make, minus any distributions.

What Are the Rules of a Traditional IRA Basis?

If you open a Traditional IRA, you’ll want to make sure that you’re familiar with the rules of a Traditional IRA basis. Your basis in a Traditional IRA is the total of all of any non-deductible contributions you made, as well as any non-taxable amounts included in rollovers, minus all of your non-taxable distributions.

How Is IRA Basis Calculated?

Contributions to a Roth IRA are never tax-deductible. That means that you will use the sum of all of your contributions to calculate your Roth IRA basis. Because many contributions to Traditional IRAs are tax-deductible in the year you make them, you don’t include all of your contributions when calculating your basis. Instead, you will only use the contributions that are NOT tax-deductible when calculating your Traditional IRA basis. If all of your Traditional IRA contributions are tax-deductible, then your basis will be $0.

Why Is Knowing Your IRA Basis Important?

You want to know what your IRA basis is, because it represents the amount of money that you can withdraw from your IRA without tax or penalty.

Do I have an IRA basis?

Everyone with an IRA has an IRA basis, although it’s possible that your IRA basis is $0. Your IRA basis is the net total of your non-tax-deductible contributions minus any distributions. For a Roth IRA, you use the value of all your contributions, while with a Traditional IRA, it’s only the contributions that were not tax-deductible.

How do I find my IRA basis?

Your IRA basis is the sum of any non-tax-deductible contributions that you make to an IRA minus any distributions that you take from your account. Your IRA basis is not generally reported anywhere. So if you don’t know your basis, you will need to calculate it based on your historical contributions and distribution amounts.

Who keeps track of your IRA basis?

The IRS does not generally keep track of your IRA basis — you are responsible for making sure your IRA basis is accurately calculated. If you use an accountant, they may calculate and track your IRA basis. You’ll want to make sure that you are accurately tracking your basis so that you can correctly pay any taxes you owe on IRA distributions.

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