No, the gains and losses inside an IRA do not count. The fact that there were losses on the funds does not change the fact that the distribution is taxable.
If you have non-deductible contributions in the IRA, that would reduce the amount of it that is taxable, but this is not common.
If you made and tracked non-deductible IRA contributions in the past, you can enter that in TurboTax and it will reduce your total tax.
This is how your would report that in TurboTax:
- Select Federal, then Deductions & Credits.
- Expand the list and scroll down to Retirement & Investments.
- Expand the section and click Start to the right of Traditional and Roth IRA Contributions.
- Check the type of IRA accounts you have.
- Continue answering the questions about contributions you made in the past until you reach the end of the section.
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