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Subject:  Re: taxes- Conversion Traditional/Roth Date:  4/18/2001  2:08 PM
Author:  TMFPixy Number:  29192 of 90542

Greetings, Irishfool, and welcome. You asked:

I just converted from a traditional IRA to a Roth IRA (about 25k).
I know I have to pay taxes next year on this. I believe on all the money. Is this correct? The bigger question is if I can take capital losses this year against the money that I will be taxed on. I doubt I can but am unsure.

If all the money in the traditional IRA was not taxed before, then you must pay ordinary income taxes on the entire amount you converted. You should probably check to see if you must make an estimated payment now to ensure you don't get penalized for underwithholding when you file your income tax return next year.

As to whether you can "take capital losses" against the conversion money, that depends on your other investment activities this year. Certainly if you have a net capital loss in all your taxable investment accounts at the end of the year, then that loss will carry over as a deduction up to $3K from your income. OTOH if you mean you had a loss on an investment in the IRA you converted, that doesn't count.

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