What Is the Fair Market Value in Form 5498 Box 5?
Understand the Fair Market Value in Box 5 of Form 5498. This figure reports your IRA's total year-end worth for your records, not your current tax return.
Financial institutions send Form 5498, the IRA Contribution Information form, to both the IRA owner and the IRS. This informational document reports details about an individual’s retirement account, including contributions and its overall value. This article clarifies the meaning and significance of the amount reported in Box 5 of this form.
Defining Fair Market Value in Box 5
The figure in Box 5 of Form 5498 represents the “Fair Market Value” (FMV) of your Individual Retirement Arrangement (IRA). This value is a snapshot of the total worth of all assets held within that specific IRA, as determined at the close of business on December 31st of the tax year. It reflects the total monetary value of everything in the account on that day, not just the cash contributions made.
The Box 5 amount encompasses all investments, such as stocks, bonds, and mutual funds held within the IRA. If you own multiple IRAs, you will receive a separate Form 5498 for each one. Each form will have a unique Box 5 value corresponding to the specific account it represents.
How the Box 5 Value is Determined
The Fair Market Value reported in Box 5 is a comprehensive calculation reflecting the account’s activity throughout the entire year. The final number is not simply the sum of your annual contributions. It starts with the account’s value at the beginning of the year and incorporates several factors to arrive at the year-end total.
This calculation includes all new contributions, such as the regular contributions noted in Box 1 or rollover amounts from Box 2. It also adds any investment earnings, which can include interest, dividends, or appreciation in the market price of the assets. Conversely, the calculation subtracts any distributions taken, administrative fees, and investment losses incurred during the year.
Using the Information from Box 5
The information in Box 5 is for your personal records and financial planning. You do not need to report this figure on your annual income tax return, and the value itself is not considered taxable income for the year reported. Its main function is to provide a clear picture of your IRA’s status at the end of the year.
First, it allows you to track the performance of your IRA investments over time by comparing the year-end FMV from one year to the next. Second, this value is foundational for calculating future Required Minimum Distributions (RMDs). When you reach the age to begin taking RMDs, the calculation will be based on the account’s fair market value as of December 31 of the previous year. You should keep Form 5498 with your tax records and contact the financial institution that issued the form if you suspect an error.