Can I deduct a loss from a Roth IRA?
March 3, 2003
Date: Wed, 22 Jan 2003
I have a question... I took out a Roth IRA $2,000 investment in 2000. The value of the Roth has dropped to $1,000. I took the money and used it for my daughter's college. Can I deduct the loss?
Date: 5 Feb 2003
Assuming this is your only Roth account, yes. The loss is deducted as a miscellaneous itemized deduction on Schedule A, subject to reduction by 2% of adjusted gross income. Since the distribution is a recovery of basis, it is not subject to an early distribution penalty. The distribution must be reported on Form 8606, even though it's not taxable. See IRS Publication 590.
For more information about Roth and traditional IRAs, buy our book: How to use Roth & IRA accounts to provide a secure retirement, 2012 Edition!
For answers to new questions, subscribe to our newsletter, Michael Gray, CPA's Tax & Business Insight by filling out the form below.
Home Newsletter Archive Introducing Michael Gray, CPA Articles Tax FAQ Need Help? Other Links