Thursday, July 31, 2014
Inquirer Daily News

On withdrawals from a Roth IRA

DEAR HARRY: I've been retired for eight years. At the time of my retirement, I converted my company's pension plan to a Roth IRA after some juggling by the mutual-fund company that is the trustee. Unfortunately, I made some dumb moves on investing in my company's pension. As a result, my Roth's total withdrawals were less than I put into it. The people at the mutual-fund company tell me that I'll be able to deduct that loss. I can see the logic of such an arrangement, but I'm hesitant. I took all of the remaining Roth money this year to buy into a retirement community. Is the deduction (almost $25,000) available now, or should I go back and file amended returns for some of it? If I take the deduction now, where do I report it on my 1040?

WHAT HARRY SAYS: This is a tricky one, and it's unusual with the tax market at its present level. But what you heard is true. Unlike withdrawals from regular IRAs and other pensions, withdrawals from Roths are not taxable income. Losses are "real" losses and may be deducted in the year of your final withdrawal. It is taken as a miscellaneous deduction (on Schedule A) subject to the floor of 2 percent of adjusted gross income on such items. It may not be used as a capital loss. It would help to attach an explanation of the item in a separate statement.


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Harry Gross Daily News Personal Finance Columnist
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