Are foreign taxes paid in an IRA deductible ?

[MinhT · Accepted solution]

All earnings and expenses inside an IRA are tax-deferred. You do not report them on your tax return.

[dkmaki]

My IRA brokerage Summary of Income report shows the Foreign taxes paid for "this period" and "this year". The amount is deducted from the account. Why aren't these taxes deductible? 

[Irene2805]

No, you can only get a foreign tax credit for taxes paid on income that is taxable on your Federal return. 

Income earned within your IRA account is not taxable on your personal return until you take a distribution from the IRA. 

[Chgardn]

So, I am just a bit confused relative to the foreign tax paid non deductible status in a standard IRA account. My point is: although the account is "tax deferred", at some future time that income will become taxable. So is it just a matter of ignoring those taxes, as well as the (hopefully)gains in the account until you begin to draw the proceeds of the account. Not in an effort to complicate the issue any further. But, is the tax treatment any different for a ROTH type account? or in the case of a full or partial conversion to a ROTH account. In that case wouldn't those foreign taxes then become deductible? 

Regards,

[KarenJ2]

Withdrawals from a Roth account are not taxable (if you meet the conditions) so you will not benefit from the foreign taxes you paid.

If you convert an IRA to a Roth, you will pay US taxes on the  IRA contributions and gains.

[Chgardn]

Karen, Thanks for the reply... I have another question along similar lines. This past year, my income was such that I exceeded the amount eligible to contribute to an IRA. However, there is a roughly $7000.00 gap to where I would enter the next higher tax bracket. As such, might it be possible to take a "taxable" distribution from an existing tax deferred IRA, and use that to fund a an existing Roth IRA up to the 2019 annual contribution limit? Essentially, what would amount to a partial ROTH conversion. I realize that I would increase my 2019 taxes by taking the funds. But, seeing as though taxes seem to be at historically low levels might that make sense to do (if in fact it is legal, or even possible to do). I know that it's possible to fund an IRA, or Roth IRA up until the tax deadline. But is it in any way possible to apply a taxable distribution taken this year (now 2020) to the prior year (2019) Thanks, Best Regards