The fair market value on Form 5498 is the total dollar value of your IRA on December 31, reported by your custodian in Box 5. That single number sets your required minimum distribution for the following year, feeds the pro-rata calculation when you have after-tax money in a traditional IRA, and caps the penalty if you over-contributed. The value itself is not income and does not appear on your tax return, but nearly every tax consequence tied to your IRA runs through it.
What Box 5 Actually Reports
Form 5498 is an informational return your IRA custodian files each year to report contributions, rollovers, conversions, and the year-end account value. Box 5 captures one snapshot: what everything in the IRA was worth on the last day of the calendar year, including publicly traded securities, mutual funds, and alternative holdings such as real estate or private equity inside a self-directed IRA.1Internal Revenue Service. About Form 5498, IRA Contribution Information
The reporting requirement comes from Internal Revenue Code Section 408, which obligates the trustee or custodian to send statements to both you and the IRS.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts Custodians generally file by May 31 of the following year; for 2025 tax year forms the deadline shifts to June 1, 2026, because May 31 falls on a Sunday.3Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498 The late-spring deadline lets the form pick up prior-year contributions you make between January 1 and April 15.4Internal Revenue Service. IRA Year-End Reminders
Box 5 applies to traditional IRAs, SEP IRAs, SIMPLE IRAs, and Roth IRAs alike. Box 7 tells you which type of account is being reported.5Internal Revenue Service. Form 5498, IRA Contribution Information
How the FMV Sets Your Required Minimum Distribution
The primary reason the IRS collects the year-end FMV is to enforce RMDs. If you own a traditional, SEP, or SIMPLE IRA, mandatory annual withdrawals begin in the year you turn 73 if you were born after 1950 and before 1960. If you were born in 1960 or later, your RMD starting age will be 75, effective in 2033.6Internal Revenue Service. Instructions for Forms 1099-R and 5498 (2025)
The math is simple. Divide the December 31 value from Box 5 by the life expectancy factor from the IRS Uniform Lifetime Table for your age. If your Box 5 FMV on December 31, 2025 is $500,000 and you turn 73 in 2026, dividing by 26.5 gives an RMD of roughly $18,868.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Your first distribution can be delayed until April 1 of the year after you turn 73. Every distribution after that must go out by December 31.
Miss an RMD or take too little, and the IRS applies a 25% excise tax on the shortfall. Correct the mistake within two years and the penalty drops to 10%.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Because Box 5 is the starting number for the whole calculation, a wrong FMV can produce a penalty even when you believe you withdrew enough.
If You Have More Than One IRA
With multiple traditional IRAs, you calculate a separate RMD for each account using each account’s Box 5 value. You can then satisfy the total from a single account or split it across several in any combination.8Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans) The total withdrawn just has to at least equal the sum of every individual RMD.
This aggregation is IRA-only. A 401(k) or 403(b) RMD must come out of that specific plan.8Internal Revenue Service. RMD Comparison Chart (IRAs vs. Defined Contribution Plans)
How Box 5 Hits Your Tax Bill Through the Pro-Rata Rule
If you have ever made nondeductible contributions to a traditional IRA, Box 5 directly affects the tax on any distribution or Roth conversion. The IRS does not let you pull out just the after-tax money tax-free. Every dollar leaving the account is treated as a proportional mix of taxable and nontaxable money, based on the ratio of your after-tax basis to the combined year-end value of all your traditional IRAs. This is the pro-rata rule, and it is the trap that catches most backdoor Roth conversions.
You divide your total nondeductible basis across all traditional IRAs by the combined year-end FMV of those accounts plus any distributions taken during the year. That ratio is the nontaxable percentage of every dollar you withdraw or convert.9Internal Revenue Service. Publication 590-B (2025), Distributions From Individual Retirement Arrangements (IRAs) Form 8606 tracks your nondeductible basis from year to year.10Internal Revenue Service. About Form 8606, Nondeductible IRAs
A worked example makes this concrete. Say you have $95,000 of pre-tax money in a traditional IRA and you make a $7,000 nondeductible contribution intending to convert it. Your combined year-end FMV across traditional IRAs is $102,000, and you convert $7,000. The nontaxable fraction is $7,000 divided by $109,000 (the $102,000 FMV plus the $7,000 distribution), about 6.4%. Only about $450 of the conversion escapes tax. The remaining $6,550 is taxable. Every traditional IRA’s Box 5 value feeds this calculation, so leaving one out will produce the wrong number on Form 8606.11Internal Revenue Service. Instructions for Form 8606 (2025)
The Cap on Excess Contribution Penalties
Contribute more than the annual limit and fail to withdraw the excess by your tax-filing deadline (including extensions), and the IRS assesses a 6% excise tax on the excess for each year it stays in the account. That penalty is capped at 6% of the combined value of all your IRAs at year-end.12Internal Revenue Service. Retirement Topics – IRA Contribution Limits Box 5 is the number that sets that cap.
Roth IRAs and Inherited IRAs
Roth IRAs also receive Form 5498, and Box 5 reports the year-end FMV the same way.5Internal Revenue Service. Form 5498, IRA Contribution Information The difference is that Roth IRAs are not subject to RMDs during the original owner’s lifetime.7Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs You will never divide your own Roth’s Box 5 by a life expectancy factor. The value still matters after your death, since inherited Roth IRAs do carry distribution requirements.
For an inherited IRA, the custodian keeps filing Form 5498 with the December 31 FMV in Box 5 each year the account exists.3Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498 Non-spouse beneficiaries who inherited from someone who died in 2020 or later generally must empty the account by the end of the 10th year after the owner’s death.13Internal Revenue Service. Retirement Topics – Beneficiary The annual FMV lets you pace withdrawals across the 10-year window so bunched distributions do not push you into a higher bracket. Eligible designated beneficiaries (surviving spouses, minor children, disabled or chronically ill individuals, and beneficiaries not more than 10 years younger than the deceased) can still stretch distributions over their own life expectancy.
Valuing Hard-to-Price Assets
For IRAs holding publicly traded securities, the custodian pulls the December 31 value from closing market prices. Self-directed IRAs holding real estate, private company stock, or other illiquid assets are different. The IRS requires plan assets to be valued at fair market value, not original cost.14Internal Revenue Service. Valuation of Plan Assets at Fair Market Value Custodians typically rely on an independent appraisal, and the cost of that appraisal usually falls on you.
If your self-directed IRA holds a rental property, expect to hire a licensed appraiser periodically and to supply comparable sales data in the years between appraisals. Residential appraisal costs generally range from a few hundred dollars to over $1,000. That recurring expense is worth planning for, because an understated FMV produces an understated RMD, which exposes you to the 25% excise tax on the shortfall.
What to Do If Box 5 Looks Wrong
If the FMV in Box 5 seems off, or you have not received Form 5498 by early June, contact your custodian. You cannot correct the number yourself; the custodian is the filer. If the review confirms an error, the custodian issues a corrected Form 5498 with the “Corrected” box checked.1Internal Revenue Service. About Form 5498, IRA Contribution Information
Get this fixed promptly. An inflated FMV pushes your RMD higher than it needs to be, so you withdraw and pay tax on more than required. An understated FMV shrinks your calculated RMD and can leave you owing the 25% excise tax on the difference. If a dispute persists, ask the custodian in writing for its valuation methodology. For accounts holding hard-to-value assets, keep your own appraisals and supporting documentation so you can challenge a figure that does not match actual market conditions.