How to Report IRA Fair Market Value on Your Tax Return

Your IRA’s fair market value doesn’t go on your Form 1040. You don’t report it at all. Your IRA custodian reports the December 31 fair market value directly to the IRS on Form 5498, and you keep the form for your records. That figure never triggers tax on its own, but it feeds two calculations that do reach your return: your Required Minimum Distribution and, if you’ve ever made non-deductible contributions, the pro-rata calculation on Form 8606.

Form 5498 Does the Reporting for You

Your custodian files Form 5498 with the IRS for every IRA you own and sends you a copy. Box 5 shows the total value of the account as of December 31.¹ You don’t attach Form 5498 to your return and you don’t transfer the number to any line on Form 1040.

The timing looks unusual compared to other tax forms. Your custodian must send you an FMV statement by January 31, but the full Form 5498 isn’t due to you until May 31, with the IRS copy due June 1.² The late deadline exists because you can make prior-year IRA contributions right up to the April filing deadline, and the form has to capture them.

Other boxes on Form 5498 matter alongside the FMV. Box 11 checks whether you owe an RMD next year, Box 12a gives the deadline, and Box 12b shows the calculated amount. An unchecked Box 11 doesn’t mean you owe nothing; the form itself warns that the absence of the check does not relieve you from taking an RMD. If your IRA holds assets that aren’t publicly traded, Box 15a reports the FMV of those specific assets and Box 15b uses a letter code to identify the type, such as real estate or private company stock.¹

Roth IRAs also get a Form 5498 with an FMV in Box 5. Roth distributions are generally tax-free, but the IRS still tracks the account value.

Where the FMV Actually Affects Your Tax Return

The FMV on Form 5498 is informational to the IRS, but it’s the starting number for two things you do report.

Your Required Minimum Distribution

The prior year’s December 31 FMV is divided by a factor from the IRS Uniform Lifetime Table (or the Joint and Last Survivor Table if your sole beneficiary is a spouse more than 10 years younger) to produce your current-year RMD. RMDs generally begin the year you turn 73, rising to 75 in 2033 under the SECURE 2.0 Act.³

If you own more than one traditional IRA, you calculate the RMD separately for each account but can pull the total from any one of them or any combination. You cannot satisfy a traditional IRA RMD by withdrawing from a Roth IRA or a workplace plan.

Missing an RMD triggers a 25% excise tax on the shortfall.⁴ Correcting the shortfall within two years by taking the missed amount and filing the appropriate return drops the penalty to 10%.⁵

The Pro-Rata Calculation on Form 8606

If you’ve ever made after-tax (non-deductible) contributions to a traditional IRA, you cannot cleanly pull the after-tax money out tax-free. The IRS treats every dollar leaving your traditional IRAs as a proportional blend of pre-tax and after-tax money. This is where the FMV directly changes the tax you owe.

The calculation happens on Form 8606, which you must file with your Form 1040 for any year you take a distribution from a traditional IRA that has after-tax basis, make a non-deductible contribution, or convert to a Roth IRA.⁶ The form uses the combined year-end FMV of all your traditional, SEP, and SIMPLE IRAs, plus any outstanding rollovers and any distributions taken during the year.⁷ The IRS aggregates everything into a single pool.

A simplified example: you have $10,000 in after-tax basis across your traditional IRAs and a combined year-end FMV of $85,000. During the year you took a $5,000 distribution, which brings the denominator to $90,000. Your tax-free ratio is $10,000 ÷ $90,000, or roughly 11%. About $556 of the $5,000 distribution is tax-free; the remaining $4,444 is taxable.

You cannot isolate the after-tax money in a single IRA and withdraw from that account alone to escape tax. Someone with $50,000 in after-tax contributions but $450,000 spread across traditional IRAs finds that only about 10% of any distribution escapes tax, regardless of which account they draw from.

Failing to file Form 8606 when required costs a $50 penalty, but the bigger problem is that without it you lose the record of your after-tax basis. The IRS then treats the entire distribution as taxable, meaning you’d pay income tax on money you already paid tax on when you contributed it.⁷

What Goes on Form 1040 When You Take a Distribution

Distributions, not FMVs, are what actually appear on your return. When you withdraw from an IRA, the custodian sends you Form 1099-R by January 31.⁸ Box 1 shows the gross distribution and Box 2a shows the taxable amount.⁹

Those figures go on Form 1040, line 4a for the total distribution and line 4b for the taxable portion.¹⁰ For a traditional IRA funded entirely with pre-tax dollars, the entire distribution is taxable and the FMV plays no direct role in the tax on that withdrawal. The FMV only enters the picture when Form 8606 is in play or when you’re calculating an RMD.

The taxable portion becomes part of your adjusted gross income, which can feed into Medicare premium surcharges, the taxability of Social Security benefits, and eligibility for certain credits.

If the FMV on Your Form 5498 Looks Wrong

You cannot correct Form 5498 yourself. Only the custodian or trustee can file a corrected version, and the IRS instructs custodians to correct errors as soon as possible once discovered.²

Contact your custodian in writing, describe the discrepancy, and ask for a corrected form. Keep a copy of the correspondence. If the wrong FMV made your RMD calculation too small and you under-withdrew, take the additional distribution promptly; fixing the shortfall within the two-year correction window drops the excise tax from 25% to 10%.⁴

An incorrect FMV also distorts the pro-rata calculation on Form 8606. If you already filed using the wrong number, file Form 1040-X once the corrected 5498 arrives. Leaving the error in place compounds it, because an incorrect FMV in one year cascades into the next year’s RMD and pro-rata ratio.

Penalties Tied to FMV and Reporting Mistakes

A few penalties can hit depending on how an FMV error affects your taxes.

A missed or short RMD is subject to a 25% excise tax on the amount you should have taken, reduced to 10% if you correct it within the correction window.⁵
Failing to file Form 8606 when required carries a $50 penalty per year, and without the form you lose proof of your after-tax basis, so the IRS treats your full distribution as taxable.⁷
If an incorrect FMV leads to a substantial tax underpayment, the IRS can assess a 20% accuracy-related penalty, doubled to 40% for a gross valuation misstatement. These penalties apply only when the resulting underpayment exceeds $5,000 for an individual.¹¹

Valuation misstatement penalties are most likely to appear with self-directed IRAs holding hard-to-value assets. If you convert a self-directed IRA to a Roth using an artificially low property valuation and the IRS later determines the property was worth substantially more, the conversion income gets recalculated and the accuracy-related penalty stacks on the additional tax. An independent appraisal before any taxable event involving non-publicly traded assets is the practical protection.

1
Internal Revenue Service. Form 5498
2
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
3
Internal Revenue Service. Retirement Topics – Required Minimum Distributions (RMDs)
4
Office of the Law Revision Counsel. 26 USC 4974 – Excise Tax on Certain Accumulations in Qualified Retirement Plans
5
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
6
Internal Revenue Service. About Form 8606, Nondeductible IRAs
7
Internal Revenue Service. Instructions for Form 8606 (2025)
8
Internal Revenue Service. General Instructions for Certain Information Returns (2025)
9
Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
10
Internal Revenue Service. 2025 Instructions for Form 1040
11
eCFR. 26 CFR 1.6662-2 – Accuracy-Related Penalty