How do I value these IRAs for tax purposes?
Updated: May 18
Q. I have three separate retirement accounts held at a single brokerage firm. The first is a traditional IRA on which I paid New Jersey tax on my contributions when I made them. I have a rollover IRA which was originally an out-of-state 401(k). I did not pay New Jersey tax on those contributions. Then there's a second rollover IRA that was originally a 457(b) account. Those contributions were taxed when I made them. In 2018 I converted $10,000 from the former 401(k) to a Roth. How do I value the year-end value of the accounts for my tax return?
A. We're glad to hear you've saved over the years.
There are a few items to note.
When you take a distribution from an IRA, you must include all IRAs - except Roth IRAs - in the cost basis calculation, said Bernie Kiely, a certified financial planner and certified public accountant with Kiely Capital Management in Morristown..
In your first traditional IRA, you received no New Jersey tax benefits when you contributed to the account, he said.
"Accordingly, all contribution to this account have cost basis for New Jersey tax purposes," he said.
For the account that was a rollover from an out-of-state 401(k) account, you say you did not receive a New Jersey tax deduction for the contributions.
"If you did not receive a tax deduction from any state, then you have basis in this account as well," Kiely said.
The third IRA account is a rollover from a 457(b) account from which you received no New Jersey tax benefit when you made contributions to it, so this account also has cost basis in it for New Jersey purposes, Kiely said.
"So when you do the cost basis calculations on Worksheet C "IRA Withdrawals," you must include all three IRA accounts in line #1," he said.
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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com's weekly e-newsletter.