What is the IRA basis? As an example you might contribute $5,000 every year to a traditional IRA, or $6,000 for those who have reached the age of 50. These contributions are usually tax deductible. An IRA basis is made when you make contributions but cannot deduct them since your gross income is more than IRS limits. These limits may apply if your spouse is covered by a retirement plan provided by your employer. When you do not receive the deduction, the contributions become after tax money and will not be taxed again when withdrawn. You are required to report these non-deductible contributions every year they are made. You can do this using the IRS form 8606.
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