clydewolf

Knemarx2,

If you are planning to convert this to a ROTH IRA next year (2010), coming from a 2009 Deductable IRA would allow you to target just this money.

If you have other deductable IRAs, and a 2009 non-deductable IRA, you will have to pro-rate the deductable and non deductable money when you do your 2010 conversion.

An example may help here: You have $4,500 in your ROTH IRA now that you recharacterize to a non-deductable IRA. You also have deductable IRAs in the amount of$27,000. Because the IRS considers all of your traditional IRAs (both deductable and non-deductable) as one IRA when you do the conversion to a ROTH IRA, you need to consider the non-deductable vs the deductable amount. If you wanted to convert $4,500 to a ROTH IRA, you would convert 80% of that amount would come from your deductable IRAs and 20% from your non-deductable. You would pay tax on 80% of the amount you convert. The 20% would convert tax free.

Note this is a simplified example and does not take into account any gains or losses that may occurr between the Recharacterization and the conversion.

Depending on what other IRAs you have may make a difference on which type of IRA you want to recharacterize into.