How to Deduct IRA Losses
- 1). Calculate your IRA loss by subtracting the amount of money you took out of it over the life of the account from your nondeductible contributions. For example, if you received $15,000 from your IRA over the life of the account and you put in $25,000 in nondeductible contributions, you would subtract $15,000 from $25,000 to figure a loss of $10,000.
- 2). File your income taxes using form 1040 and use Schedule A to itemize your deductions. You cannot claim the deduction for IRA losses if you use another tax form or elect not to itemize.
- 3). Report the amount of the deduction as a miscellaneous tax deduction on Schedule A. This amount will be added to your other miscellaneous deductions.
- 4). Multiply your adjusted gross income, found on line 38 of form 1040, by 0.02. For example, if your adjusted gross income equals $50,000, you would multiply $50,000 by 0.02 to get $1,000.
- 5). Subtract the result of step 4 from the amount of your miscellaneous deductions, including your IRA losses, to find the deduction value. This amount will be used to decrease your taxable income.
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