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I am planning to recharacterize the excess amount of contributions I made to my Roth IRA this year to a traditional IRA account. But, I am worried that, since my Roth IRA contributions are after-tax, and that the distributions from the traditional IRA are taxable (for after I retire), I would have to pay taxes twice on that amount of money that I am moving? Is that right, or am I misunderstanding something?

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  • Is it an "excess contribution" because it is over the annual contribution limit for all IRAs ($6000 or $7000 for 50 and up)? Or because you are over the income limit for direct Roth IRA contributions (so your Roth IRA contribution limit is reduced), but you are still below the annual contribution limit for all IRAs ($6000 or $7000)?
    – user102008
    Sep 18 at 16:56

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To be clear, is this because you are ineligible or in phaseout for Roth because of AGI, and ineligible for deductible trad because of employer plan coverage and AGI? If you are over 6k in Roth (7k with catchup) moving it to trad (deductible or not) doesn't work; the limit is for Roth and trad combined. If ineligible for Roth but not in employer plan, you can recharacterize to deductible trad (unless for some reason you don't want the deduction). But to answer as asked:

Distributions from a traditional/non-Roth IRA are taxable to the extent they are not from 'nondeductible' = post-tax contributions (computed pro rata), which are called 'basis' (similar to, but not the same as, 'cost basis' for computing capital gain/loss on non-deferred investments). Most people don't learn this qualification because they don't make post-tax trad contributions. You do need to file and keep a copy of form 8606 every year you make such a contribution or any distribution, which over a long period becomes a nuisance; see How is non-deductible portion of Traditional IRA determined at time of withdrawal? -- and/or pubs 590-A and B, which I have to say is a pretty obvious place to look (for information about US tax handling of X, where in this case X is 'an IRA', look in the IRS publication(s) about X)

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