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.
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.
Since partial distributions are available, you can drive the amount of income you show against your loss —
- Flatten your loss – not lose it
- Possibly freely distribute your taxable IRA
- 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