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Protecting & Preserving WealthAuthor: Bruce Hosler
In the Protecting & Preserving Wealth podcast, Bruce Hosler discusses and provides timely answers to important topics for our listeners: Tax Reduction Strategies Financial & Estate Planning Investment Management Retirement Planning Insurance Strategies Business Owner Exit-Planning Strategies Current Events and their Market Effects We started the podcast because a number of clients have questions, and this is a way for us to give them a venue to listen to different answers on all the things they're concerned about today. First and foremost, foundationally, for most people, taxes are a very important thing. We always start with taxes and then we go from there and work on financial planning issues like retirement. Am I going to have enough? How am I going to leave my stuff to my legacy, to my kids and family? In estate planning, we include asset management because everybody wants to know where their money's invested and how safe and how protected it can be. And how can it grow in the face of this inflation that we're facing today. And finally, we use insurance strategies to make sure that when the moment of truth arrives, everything's okay for the family. Throughout this podcast, we're going to meet the Hosler team and how each of them plays a role in securing your financial future. Hosler Wealth Management can be reached in their Prescott office at (928) 778-7666, in their Scottsdale office at (480) 994-7342, or on the web at https://www.hoslerwm.com/. Disclosure: Investment advisory services are offered through Mutual Advisors, LLC DBA Hosler Wealth Management, a SEC registered investment adviser. Securities are offered through Mutual Securities, Inc., member FINRA/SIPC. Mutual Advisors, LLC and Mutual Securities, Inc. (collectively Mutual Group) are affiliated companies. Forward-looking commentary should not be misconstrued as investment or financial advice. The advisor associated with this podcast is not monitored for comments and any comments should be given direc Language: en Genres: Business, Education, How To, Investing Contact email: Get it Feed URL: Get it iTunes ID: Get it Trailer: |
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Traditional IRA Basis 8606 and Pro-Rata Rule
Episode 93
Wednesday, 16 September, 2026
Today we explain how basis works inside a traditional IRA and why accurate recordkeeping matters. IRA basis is not the same as cost basis in a taxable investment account. It represents money that has already been taxed before entering the IRA. When we fail to track that amount correctly, we may pay tax on the same money twice when it is withdrawn. 📚 Get Bruce’s Book: Moving To Tax-Free (on Amazon) https://amzn.to/4msRo2k ⏱️ Chapters & Timestamps (00:00) Traditional IRA Basis and Double Taxation (01:27) How Traditional IRA Basis Is Created (02:49) The Pro-Rata Rule and Form 8606 (06:00) Why Traditional IRA Basis Does Not Grow (06:49) Exceptions to the Pro-Rata Rule (09:51) Basis in an Inherited IRA (11:10) Finding Basis on Prior Tax Returns Basis can enter a traditional IRA in several ways. We may make a nondeductible IRA contribution, often as part of a backdoor Roth strategy. We may also make a contribution that we expected to deduct, only to discover that our income was too high. Another common situation occurs when after tax 401(k) contributions are rolled into a traditional IRA without being separated from pretax funds. Once after tax money is mixed with other IRA assets, we generally cannot withdraw only the basis. The pro rata rule requires each distribution to include a proportional share of taxable and nontaxable money. Form 8606 calculates and reports that division. It also combines all traditional, SEP, and SIMPLE IRA balances when determining the taxable percentage. We cannot isolate basis by withdrawing from one particular IRA account. It's important to file Form 8606 consistently. Basis does not increase as the account grows. Investment growth remains tax deferred and will generally be taxable when distributed. The form creates an ongoing record of the amount that has already been taxed. That history can be lost when you change accountants or fail to file the form during a year without an IRA contribution or distribution. We also cover several transactions that receive different treatment, including rollovers, qualified charitable distributions, and a once in a lifetime qualified HSA funding distribution. IRA custodians do not track basis for us. The responsibility ultimately belongs to the taxpayer. Inherited IRAs create another important risk. Basis can transfer to the beneficiary, but the custodian may not provide that information. We may need to review the original owner’s prior tax returns and Form 8606 filings. When there are multiple beneficiaries, the basis is divided proportionally. Without those records, beneficiaries may incorrectly assume the entire inherited IRA is taxable. The central message is simple. We need to identify IRA basis, preserve the documentation, file Form 8606 correctly, and communicate with our tax and financial professionals. These steps can help us avoid unnecessary double taxation. For more information about anything related to your finances, contact Bruce Hosler and the team at Hosler Wealth Management: Visit us online at https://www.hoslerwm.com/Contact Our Team: https://hoslerwm.com/contact-us/Or call our Prescott office at (928) 778-7666 or our Scottsdale office at (480) 994-7342.For more podcast episodes, visit our podcast website at https://hoslerwm.com/protectingwealthpodcast/Limitation of Liability Disclosures: https://www.hoslerwm.com/disclosures/Link Disclosure: The information being provided is strictly as a courtesy. When you link to any of the websites provided here, you are leaving this website. We make no representation as to the completeness or accuracy of information provided at these websites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information, and programs made available through this website. When you access one of these websites, you are leaving our website and assume total responsibility and risk for your use of the websites you are linking to.Copyright © 2022-2026 Hosler Wealth Management | All Rights Reserved. Produced by JAG Podcast Productions - www.jagpodcastproductions.com. #ProtectingWealthPodcast #ProtectingandPreservingWealthPodcast #HoslerWealthManagement #BruceHosler
