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Financial Planning / Tax Strategies


Subject:  Re: Close roth account Date:  6/27/2013  10:28 PM
Author:  aj485 Number:  118773 of 127549

I will be amazed if you can deduct a loss in a Roth IRA. Since gains in a Roth are not taxed, why would losses be deductible?

Prepare to be amazed.

As previously mentioned, you must cash out all of your Roth IRAs and it's a miscellaneous deduction that is subject to the 2% of AGI haircut, and is not allowable for AMT purposes. Here is the pertinent section from IRS Pub 590

Recognizing Losses on Investments

If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis.

Your basis is the total amount of contributions in your Roth IRAs.

You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040). Any such losses are added back to taxable income for purposes of calculating the alternative minimum tax.

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