Dear Dr. Don, I will be rolling over my retirement funds (approximately $21,000) from my most recent job into a traditional rollover IRA. Can I claim a contribution on my taxes for the $5,000 per year that is allowable?If not, what can I do? -- Stephanie StymiedDear Stephanie, Transferring your retirement funds from your previous employer into a traditional IRA rollover does not count as a new contribution to an IRA. It's considered a rollover contribution. Your contributions to your employer's plan were tax-deferred compensation when you made them. You don't get two tax breaks on one deferral.The IRA says it best in its Publication 590, "Individual Retirement Arrangements":Treatment of rollovers. You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and Reporting rollovers from employer plans.As for the last question -- "If not, what can I do?" -- your options haven't changed just because the rollover contribution isn't a tax-deductible contribution. You can keep the money with your old employer's plan or roll it over into a traditional IRA (or a Roth IRA if you are eligible).Publication 590 has all the details, but talk to your tax professional if you're uncertain about which choice is best for you.To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & investing" or "Money." Read more Dr. Don columns for additional personal finance advice. Create a news alert for "retirement" advertisementRelated Links:Roth IRA mistake costs plentyWill a refinance result in higher taxes?Tax credits: Cut your tax billRelated Articles:All there is to know about retirementWho needs a financial planner?Traditional or Roth IRA?
Dear Dr. Don, I will be rolling over my retirement funds (approximately $21,000) from my most recent job into a traditional rollover IRA. Can I claim a contribution on my taxes for the $5,000 per year that is allowable?
If not, what can I do? -- Stephanie Stymied
Dear Stephanie, Transferring your retirement funds from your previous employer into a traditional IRA rollover does not count as a new contribution to an IRA. It's considered a rollover contribution. Your contributions to your employer's plan were tax-deferred compensation when you made them. You don't get two tax breaks on one deferral.
The IRA says it best in its Publication 590, "Individual Retirement Arrangements":
Treatment of rollovers. You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and Reporting rollovers from employer plans.
As for the last question -- "If not, what can I do?" -- your options haven't changed just because the rollover contribution isn't a tax-deductible contribution. You can keep the money with your old employer's plan or roll it over into a traditional IRA (or a Roth IRA if you are eligible).
Publication 590 has all the details, but talk to your tax professional if you're uncertain about which choice is best for you.
To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & investing" or "Money." Read more Dr. Don columns for additional personal finance advice.
Create a news alert for "retirement"