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How Do I Report My Roth IRA Contribution?

Stupid small question: I contributed $2,000 to a Roth IRA in 1999. I know that I don't take a deduction for it, but I'm wondering how, or whether, to indicate on my tax form that I made the contribution.

-- Gerard Monsen


You are not the first person to ask this question and odds are good you won't be the last -- especially since Roth IRA rules are so convoluted, and no one has made any effort to make them any easier.

To be eligible to contribute to a Roth IRA, your adjusted gross income must be below $95,000 if you're single (contributions are phased out up to $110,000) or $150,000 if you're married (contributions are phased out up to $160,000). If you're married and filing separately, contributions are phased out between zero and $10,000.

Assuming you meet those criteria, if all you did in 1999 was make a contribution to your Roth IRA, you don't have to report a thing to Uncle Sam.

And that's too bad. You should be required to report your contributions because it will help you keep track of your cost basis on the account.

To that end, you still should fill out the worksheet on page 6 of the instructions to Form 8606 -- Nondeductible IRAs. You can record the cost basis of your contributions here. Then just file it away in a safe place.

If you converted your traditional IRA to a Roth IRA, or your contribution to a Roth is disqualified because your adjusted gross income exceeded the limitations spelled out above, you must file Form 8606. Check out our Roth IRA Reporting Guide for more details.

Home Improvements

In 1999, I spent more than $35,000 on renovating the kitchen, bathroom and basement of a 100-year-old house I own and dwell in. Can I write this off in any way?

-- Paul Lee


Sorry, you can't write off any of these expenses.

But you can adjust your original cost basis in the home by the amount you spend to improve the property, says Bill Fleming, director of personal financial services for PricewaterhouseCoopers in Hartford, Conn. So add the $35,000 you spent on renovations to the original cost of the home. This will lessen the taxable gain when you decide to sell it. (See section 1016 of the tax code for more on adjusting your home's cost basis.)

For example, if you bought the home for $200,000, your basis becomes $235,000. If someday you sell it for $500,000, your gain will be $265,000, instead of $300,000.

Remember, as long as your home was your principal residence and you owned it for two of the last five years, you won't pay tax on the first $250,000 ($500,000 for a married couple) of any gain generated from the sale of your home.

So, assuming you're single, in the above example you will only owe tax on $15,000, rather than $50,000.

For more on new home sale rules see this previous Tax Forum .

Calendar Tricks

As you know, April 15 falls on a Saturday, so your 1999 federal income tax return is not due until Monday, April 17 at midnight. But taxpayers in Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island and northern New York state have until April 18.

Why? Because they mail their returns to the Internal Revenue Service center in Andover, Mass., where April 17 is a state holiday, Patriots Day.

Good news? Only for taxpayers who just file a Massachusetts state return in addition to their federal return. Then both returns are not due until April 18. All other taxpayers still have to get their state returns in by April 17. And you can't prepare your state return without preparing your federal.

So it's a lot of hoopla over nothing.

Send your questions and comments to , and please include your full name. Tax Forum appears daily through April 17.
TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.

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