Have a Tax Question? Ask a Tax Expert
Hello and thank you for using Just Answer.
Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Because you have no basis in your IRA, any distributions are fully taxable when received. If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. These nondeductible contributions are not taxed when they are distributed to you. They are a return of your investment in your IRA. If ever made a nondeductible contribution you should have a Form 8606 for that tax year showing this contribution. Check you prior year returns to see if any non deductible contributions were made.
If you have a loss on your traditional IRA investment, you can recognize (include) the loss on your income tax return, but only when all the amounts in all your traditional IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis, if any.
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.
Checking for either of the two above mentioned items could help you if they apply. Taking money form your IRA is a taxable event. Since IRAs are deferred for tax purposes, when you receive distributions you are required to pay the tax. Being over 59 1/2 does save you from the additional 10% penalty (which you probably already knew but a high point that bears repeating).
I sincerely XXXXX XXXXX information is helpful,