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I am living, studying/working, investing mutual funds, and paying taxes in U.S.. I have a mutual fund and I have accumulated about 10k loss on it in both my margin account and Roth IRA account. If I sell the fund now, can I use the losses to offset my income taxes in the following years?

  1. Is there a limit on the amount of loss that I can claim to offset my tax each year?

  2. Is there a limit on the number of following years during which I can claim the loss I realize this year? For example, after five years, I won't be able to claim any loss I realize this year, even if I haven't claimed all of my loss to offset my taxes.

  3. For the part of the fund in my Roth IRA account, will there be some cost to me for selling the fund and taking all the money out of the account?

Thanks!

  • "So would you recommend to liquidate my Roth IRA (I only have one Roth IRA), and realized the loss? My loss is about $2000, and I need money to finance my tuition and living next year." There is no way to give the advice to sell a position based on the information you have provided. You have not provided balances for the accounts in question. Generally selling just for tax purposes is not advisable. Nor is it advisable to place into investment vehicles or retirement funds money that you need to spend in the next few years. Your situation is more complex then the question you have asked. – mhoran_psprep Nov 12 '13 at 11:03
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1) Losses first offset gains, if any. Then up to $3000 can offset ordinary earned income. The rest is deferred to the next year.

2) If you have a large loss, it can carry forward indefinitely, or until the tax code changes. At some point, you might have gains that can be offset by some of this loss.

3) The Roth must be closed, and liquidated in full. Only then can the loss be taken.

  • 1
    +1 Also, not only the Roth IRA account with the loss must be closed and liquidated in full, but all your Roth IRA accounts (including those with gains, if any) must also be closed and liquidated in full before the loss can be taken. The loss is the total of all money you get as the result of the liquidations minus the total of all your Roth IRA contributions. Worse yet, the loss is taken as a Miscellaneous Deduction on Schedule A, and is subject to the 2%-of-AGI floor below which no Miscellaneous Deductions are allowed. Losses in taxable accounts are handled differently, as JoeTaxpayer says – Dilip Sarwate Nov 12 '13 at 1:35
  • Thanks, Joe and @Dilip. So would you recommend to liquidate my Roth IRA (I only have one Roth IRA), and realized the loss? My loss is about $2000, and I need money to finance my tuition and living next year. – Ben Nov 12 '13 at 1:53
  • @DilipSarwate - I missed quite a bit, you're welcome to edit my answer, or I can do it later. – JTP - Apologise to Monica Nov 12 '13 at 1:53

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