I understand that an RMD from my deceased father's traditional IRA will be Taxed as ordinary income. My question is can I use those funds to make a deductible contribution to an existing traditional IRA and therefore offset the tax effect of the inherited IRA RMD?
asked 04 Nov '11, 22:55
Like so many other tax questions, the answer is: it depends.
Do you have earned income? You must have earned taxable compensation (wages or self employment income)during the year to contribute to an IRA.
What is your modified adjusted gross income? Over certain income levels your deduction may be limited or eliminated entirely. The limitation amounts depend on your filing status, and whether or not you and/or your spouse is covered by a retirement plan at work.
If you do have earned income and meet the other requirements, then it doesn't make a difference where the contribution money comes from.
answered 08 Nov '11, 20:52