Using an IRA distribution to offset an Active Income Loss

Last week in our end of the year tax strategies, we spoke of a Roth Conversion in order to maximize your tax deductions. This weeks topic is another very similar handy technique that needs to be completed before year-end to work.

This technique is especially helpful if you are GREATER than 59.5 years young – 

IRA distribution to Offset a Loss

Due to a pinched nerve in my right shoulder, this post is going to be short, as the pain is almost unbearable to type — always worried about losing my voice to communicate — how times have changed!

Required Minimum Distributions or RMD’s affect all of us once we reach age 70.5 – mandating distributions so Uncle Sam can get his tax dollars – the link is to a three-part series – will review in greater detail by years end.RMD

If you have Active income and are showing a loss this year AND are greater than 59.5 years young, BUT NOT YET 70.5 AND SUBJECT TO RMD consider an IRA distribution — it will do much of the same that the Roth conversion will do —

Quick Example: As of today you have $50k of losses from a qualifying active activity – rather than lose that loss, DISTRIBUTE  $50k of your IRA, creating an offsetting $50k of income to flatten your income – you might even consider DISTRIBUTING your loss plus your deductions.Ira

Since partial distributions are available, you can drive the amount of income you show against your loss —

  1. Flatten your loss – not lose it
  2. Possibly freely distribute your taxable IRA
  3. Help minimize your future RMD’s

This is a sophisticated technique and requires estimates, planning and professional council — do not try this without help from your financial planning and tax advisor – a mistake can be costly.  Done correctly, the rewards can be outstanding! Oh — this post is not a recommendation, only  a reminder of what is available –

Have a Great — Less Taxable — Day!

John A. Kvale CFA, CFP
8222 Douglas Ave # 590
Dallas, TX 75225





6 responses to “Using an IRA distribution to offset an Active Income Loss

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  5. Bob… I have a whole new appreciation for pain.. and this probably does not even compare to what you went though !! Thanks for the good wishes john

  6. John, sorry to hear about your arm. I feel your pain from my rotator cuff surgery late last year. Good luck .


    Bob Fowler Fowler Consulting Group LLC PO Box 2085 Lexington , S.C. 29071 336-402-1076


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