1. If I withdraw money from my single Roth IRA account to make it empty, will the account be closed?
  2. Is there any expense to open a new Roth IRA account?
  3. If my purpose of emptying my Roth IRA account is to claim about $2000 capital loss in the account, is it worth any expenses that may occur, for example, for later opening a new Roth IRA account?
  4. By the way, is there usually some maintenance fee for keeping a Roth IRA account charged by most brokery companies?

If you have multiple accounts, you have to empty them all before you can deduct any losses.

Your loss is not a capital loss, its a deduction. It is calculated based on the total amount you have withdrawn from all your Roth IRA's, minus the total basis. It will be subject to the 2% AGI treshhold (i.e.: if your AGI is > 100K, none of it is deductible, and you have to itemize to get it).

Bottom line - think twice.

Summarizing the discussion in comments:

If you have a very low AGI, I would guess that your tax liability is pretty low as well. Even if you deduct the whole $2K, and all of it is above the other deductions you have (which in turn is above the standard deduction of almost $6K), you save say $300 if you're in 15% tax bracket. That's the most savings you have.

However I'm assuming something here: I'm assuming that you're itemizing your deductions already and they're above the standard deduction.

This is very unlikely, with such a low income. You don't have state taxes to deduct, you probably don't spend a lot to deduct sales taxes, and I would argue that with the low AGI you probably don't own property, and if you do - you don't have a mortgage with a significant interest on it.

You can be in 15% bracket with AGI between (roughly) $8K and $35K, i.e.: you cannot deduct between $160 and $750 of the $2K, so it's already less than the maximum $300. If your AGI is $8K, the deduction doesn't matter, EIC might cover all of your taxes anyway. If your AGI is $30K, you can deduct only $1400, so if you're in the 15% bracket - you saved $210. That, again, assuming it's above your other deductions, which in turn are already above the standard deduction. Highly unlikely.

As I said in the comments - I do not think you can realistically save on taxes because of this loss in such a manner.

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  • Thanks! My AGI is very low and negligible. My account has been open for almost 5 years, and my investment in it hasn't been changed for the same period. So I think it may be worth to empty the account? The bad sides I can imagine are: (1) I will not be able to make up my previous contribution to Roth IRA because of the yearly limit. (2) Also I am not sure if re-opening a Roth IRA and keeping it open will cost any expenses? – Tim Jun 10 '12 at 0:35
  • @Tim expenses are paid to the broker. I have an IRA account and don't pay a dime for it (except for trading fees). Just shop around. If you have negligible AGI, you would probably not be able to deduct the loss anyway, so why bother? – littleadv Jun 10 '12 at 0:50
  • (1) If I understand correctly, when I have negligible AGI, the loss in my Roth IRA subtract the 2% AGI threshold will be close to the loss in my Roth IRA. So I might be able to claim more deduction for my loss in Roth IRA? (2) You emphasized "your loss is not a capital loss, its a deduction". I wonder if deduction means something that can apply only to the current year, not the following years if the deduction is not fully utilized, while the left-over of capital loss can be carried to the next years? – Tim Jun 10 '12 at 1:12
  • Tim: If your AGI is low and negligible, you probably owe no tax regardless of whether you itemize your deductions or not. Why are you bothering about a capital loss in your Roth IRA and trying to deduct it somehow? Keep the money in the Roth IRA and hope for better things in the future. – Dilip Sarwate Jun 10 '12 at 1:31
  • @Tim, what I meant is that the loss deduction won't affect your taxes significantly. And are you itemizing your deductions? Because if not, it doesn't matter if you're above the 2% limit or not, because the standard deduction is much more than the 2K you're trying to deduct anyway. And no, you can not carry this deduction forward. It seems to me that these 2000 dollars will not have any affect whatsoever on your taxes. – littleadv Jun 10 '12 at 1:49
  1. Ask your broker. Probably not. They will keep the account open in case you want to deposit money into it in the future.
  2. Not with most brokers. They want your business. There may be a minimum deposit, but there will probably not be a fee for opening an account.
  3. (addressed in other answers)
  4. Account fees depend on your broker. Look at the fee schedule online at the broker's website. Some companies do charge fees. The companies I personally use do not charge me any fees. (Vanguard waives the fees for its mutual funds with the use of electronic statements; E*Trade makes its money off brokerage commissions in the account.)
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