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bleary
New Member

We have an IRA with one stock it it, and that stock has lost a ton of value. if we close this out can we write off the loss on our taxes ?

 
4 Replies
DoninGA
Level 15

We have an IRA with one stock it it, and that stock has lost a ton of value. if we close this out can we write off the loss on our taxes ?

No, you cannot deduct the losses from the IRA if you close the account.

The Tax Cuts and Jobs Act eliminated the deduction for miscellaneous itemized deductions, which, prior to January 1, 2018, were subject to the 2% of adjusted gross income limitation. Traditional and Roth IRA losses were included in this category of deduction prior to 2018.

VolvoGirl
Level 15

We have an IRA with one stock it it, and that stock has lost a ton of value. if we close this out can we write off the loss on our taxes ?

I'm not sure if you can still deduct that with the new limitations starting in 2018.  Otherwise you get the loss by having less income to report when you take a distribution.  @dmertz 

 

But the rule before 2018 was.....

If this was your ONLY IRA and you closed it AND did NOT take the tax deduction for your contributions you may be able to claim some of the loss.

 

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.

 

Your basis is the total amount of the nondeductible contributions in your traditional IRAs.

dmertz
Level 15

We have an IRA with one stock it it, and that stock has lost a ton of value. if we close this out can we write off the loss on our taxes ?

The others have addressed this accurately.  There is essentially no way to realize the loss.  In general, the loss in value simply means that you'll have less taxable income to report when eventually distributed.

 

If you made nondeductible contributions to your traditional IRAs, the deduction for unrecoverable basis that might occur if you receive distributions of all of your traditional IRAs is suspended until 2026, so you would have to wait until then to distribute the last of your traditional IRA funds to be able to claim that deduction, and only if the distribution then results in unrecoverable basis in nondeductible traditional IRA contributions.

Carl
Level 15

We have an IRA with one stock it it, and that stock has lost a ton of value. if we close this out can we write off the loss on our taxes ?

The typical IRA is funded with before tax dollars - meaning you did not pay taxes on that money you put in the IRA. So when you take it out that is when you will pay taxes on it, and you pay taxes only on the amount taken out.

So if you deposit $10,000 into the IRA you did not pay taxes on that $10,000 from the start. Later it's only worth $5000. So you close it out and take the $5000 distribution. That distribution is taxable. Period. If you take it out before retirement age it's also subject to a 10% early withdrawal penalty.

 

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