Question

Excess Roth Contribution; reporting and deductibility

Forum|Forum|2 years ago
January 28, 2024
2 replies
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I made a $7k Roth Contribution for my wife (61 years old) on 12/5/22 for 2022. Her income was too high so I withdrew it ($6700) on 3/22/23.

1. Do I have to report this contribution on 2023 taxes? (I think not)

2. Can I claim the resulting $300 or so loss?

Thanks

Not A Product Question

M

MinhT1

As you have withdrawn the 2022 excess contribution before 4/15/23, there's no need to report it.

Your loss of $300 isn't deductible and doesn't need to be reported.

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M

Mike9241

Qualifying for a tax deduction
Only in very rare situations can you deduct losses in your Roth IRA account. To qualify for the deduction, you must close all of your Roth IRA accounts, including Roth IRA accounts that have profits.

The value of your Roth IRA from the previous year or at any point during the time the account was open does not matter. You must show a loss from your tax basis in the account.

Figuring your tax deduction
Your deduction is equal to the amount by which your tax basis exceeds your total withdrawals from your Roth IRAs. Your tax basis is the total amount of your contributions to the Roth IRA because these contributions are made with after-tax dollars.

For example, if over the years you have contributed $25,000 to your Roth IRAs but receive $15,000 when you close all these accounts, you would have a net loss of $10,000.