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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12703
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have some questions about losses I have in some roth

Customer Question

Hello - I have some questions about losses I have in some roth ira's
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: A few years ago, I mad some terrible trades and lost a bunch of money -- I'm wondering if it might be best for me to close out those accounts today so I can claim losses on my 2016 taxes
JA: Is there anything else important you think the Accountant should know?
Customer: The accounts that have incured losses are a roth ira and a 401k rollover thanks
Submitted: 9 months ago.
Category: Tax
Expert:  Lane replied 9 months ago.

Hi. My name's Lane. I can help explain this.

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The Internal Revenue Service does not permit you to deduct losses from your Roth IRA on a year-to-year basis, so the only way to deduct your losses is to close your Roth IRA accounts.

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To qualify for the deduction, you must close all of your Roth IRA accounts, including Roth IRA accounts that have profits...(traditional IRAs need not be closed)

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You'll use your basis in the roth of course, to calculate the loss. (The deduction is equal to the amount by which your tax basis - your after tax contributions contributions - exceeds your total withdrawals from your Roth IRAs.

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And on the 401(k) rollover, if this was pre-tax money - rather than a designated Roth account in a 401(k) - (unless you did a ROTH conversion and paid the tax - and this is also a ROTH IRA) - so sorry, you don't have any tax basis to take a loss there ... as the dollars contributed to the 401(k) were not taxed, but rather deferred.

Expert:  Lane replied 9 months ago.

Please let me know if you have ANY questions at all, before rating me

But if this has helped, and you don’t have other questions, I would appreciate a positive rating (using those stars on your screen – and clicking submit)

That’s the only way JustAnswer will compensate me for the work here.

Thanks,

Lane

I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986.

Customer: replied 9 months ago.
Thanks Lane - so the accounts types listed in Tradeking for one is Apex C/f Ira Account and the other is Apex C/f Rollover Ira. Since they're both IRA's would they both be eligible or only the one that doesn't say rollover. I have no other Roth's and I'm fine with closing both of these. My losses are probably somewhere around 30K. Our AGI is around 200K.So, two follow-up questions.1) If I decided to do this, could I close these accounts today and be eligible for the deduction on my 2016 tax return?
2) Can you explain how I could estimate the deduction I would get in a bit better detail? Our tax scenerio this year is pretty similar to last year so if you tell me what to look for on that return, I should be able to base it off of last years.
Expert:  Lane replied 9 months ago.

That'r right only the one that doesn't say rollover. A rollover IRA (that hasn't been converted To a Roth) has no tax basis ... it's all pre-tax money. It's imposibl to take a loss on a rolloever IRA (a traditional IRA that's coded as a rollover IRA becasue it came from a qulified plan.

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And on the second one ... ber sure it IS a roth and not just a traditional IRA ... normally a Roth would have "Roth IRA" in the name.

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1) If it IS a Roth, then yes, as long as you get it done by midnight tonight, it affects 2016 taxes.

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2) Regarding the deduction, remember this is a CAPITAL loss, not an ordinary income deduction. Capital gains mst first be used to reduce any capital gains in the tax year and then 3000 can be used against ordinary income (however, at your tax bracket, 28% on taxable income over $148,850 to $226,850) the 3000 will reduce your taxes by (3000 x .28) = $840

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Then each year going forward, you'll do the same thing; use the capital loss carryforward to bring any CAPITAL gains to zero and then use an addition 3000 of the loss against any other income, 30K is used up.

Expert:  Lane replied 9 months ago.

Please let me know if you have ANY questions at all, before rating me

But if this has helped, and you don’t have other questions, I would appreciate a positive rating (using those stars on your screen – and clicking submit)

That’s the only way JustAnswer will compensate me for the work here.

Thanks,

Lane

Expert:  Lane replied 9 months ago.

Hi,

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I’m just checking back in to see how things are going.

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Did my answer help?

If this HAS helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars or faces on your screen, and then clicking “submit")

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But if you need more on this, please let me know.

Lane