I withdrew $100K early from my 401K, and invested it into FOREX. I ended up loosing all of it. Can I offset my initial tax payment from the withdrawal with the losses?

[VolvoGirl · Accepted solution]

Sorry no.   The 401K withdrawal will be taxable.  For the investment loss you can only deduct a max of $3,000.  The rest you will have to carryover.  Do you have any other investment sales?

You get to first offset the loss against any gains you have each year so that can use more of it up.  Then after applying the loss to the current gains you can take a max loss of 3,000 (1,500 MFS)per year.  Turbo Tax does all the calculations for you.

[xmasbaby0 · Accepted solution]

You will receive a 1099R for the 401k distribution you took---and if you are younger than 59 1/2 you are going to pay the 10% early withdrawal penalty as well as ordinary income tax on that withdrawal.

To enter your retirement income, Go to  Federal> Wages and Income>Retirement Plans and Social Security>IRA  401 k) Pension Plan Withdrawals to enter your 1099R.

You will get a document for the investment loss---likely a 1099B--which you will need to enter.

The software will do all of the calculations for you.   We do not know what other income you had for 2024 or how much tax you had withheld, but it sounds like you might need to expect to owe the IRS.