When you take a distribution from a traditional individual retirement account, typically the entire amount is taxable. However, if you elected to make nondeductible contributions to your traditional IRA, make sure you do not pay more in taxes than you have to by properly calculating the taxable portion of the withdrawal. Money that you did not claim a tax deduction for comes out tax-free, but you need to compute the portion of your withdrawal consisting of the nondeductible contributions.

1. Add the value of all the nondeductible contributions you have made to your traditional IRA over the years and subtract the value of any withdrawals of nondeductible contributions made to the account. For example, if you've put in $50,000 of nondeductible contributions, but previously withdrawn $10,000 in nondeductible contributions, your account contains $40,000 in nondeductible contributions.

2. Divide the nondeductible contributions in your traditional IRA by the total value of your IRA at the time you take your distribution. For example, if you have contributed $40,000 in nondeductible contributions in your traditional IRA at the time of the distribution, and the account total equals $160,000, divide $40,000 by $160,000 to find that 25 percent of your account is nondeductible contributions.

3. Multiply the percentage of nondeductible contributions in the account by the amount of your distribution to find the nontaxable portion. In this example, if you took out $18,000, multiply $18,000 by 0.25 to find that $4,500 of the distribution is not taxable.

4. Subtract the nontaxable portion of the distribution from the total distribution to find the taxable portion of the traditional IRA distribution. Completing the example, subtract $4,500 from $18,000 to find that $13,500 is taxable.

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