You can deduct IRA losses that you may have realized recently from the stock market dive. They are not capital losses, but limited miscellaneous itemized deductions. That means they must exceed 2% of your income and you need to be someone who would already itemize on your return. However, with the level of losses that many people have seen, this threshold may not be too hard to reach.
It would be hard to have a deductible loss in a Traditional IRA, because most people make tax-deductible contributions to their traditional IRA and have no basis. No basis means you have no loss according to IRS rules.
A Roth IRA is different because you are making after-tax contributions. That means that if you account is worth less today than the sum of all your prior contributions, you have a tax deductible loss. You would need to liquidate the account in order to take the loss (no partial liquidations).
Keep in mind that once the money is withdrawn from the account, you can only put it back in at the rate of 5,000 a year.
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The content on this blog (www.acollinscpa.blogspot.com) is my personal opinion based on my study and understanding of tax laws, policies and regulations. It’s provided for your private, noncommercial, educational and informational purposes only. It’s not a recommendation or endorsement of any company or product. It should not be relied upon as specific tax advice for your personal situation. I strongly suggest that when it comes to filing your taxes, you get additional, professional guidance from individuals who are familiar with your specific circumstances. Those who choose to rely solely upon the information on this site do so at their own risk and peril, and cannot hold the author liable in any form or fashion.
IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to notify you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed by law.
IRS CIRCULAR 230 DISCLOSURE REQUIREMENT: IRS Circular 230 requires us to notify you that any tax advice contained in this communication is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed by law.
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