Hi, all. If securities are transferred from Roth IRA account to a traditional IRA account, is it deductible as if they are new funds being transferred in? Thanks
Can you elaborate? Withdrawals of Roth IRA contributions are tax free and contributions to Traditional IRA are tax deductible with some exceptions of course. You sold some securities in your Roth IRA account and withdrew not in excess of your life to date Roth IRA contributions and then contributed that into a Traditional IRA account? That would sound deductible like new funds transferred in.
No. Roth funds aren’t taxable, so they can’t be deductible. There would be no purpose to doing this other than a desire to pay more taxes in the future. As you’re converting tax free capital gains into taxable regular income.
Can you elaborate? Withdrawals of Roth IRA contributions are tax free and contributions to Traditional IRA are tax deductible with some exceptions of course. You sold some securities in your Roth IRA account and withdrew not in excess of your life to date Roth IRA contributions and then contributed that into a Traditional IRA account? That would sound deductible like new funds transferred in.
Try posting to below thread for definitely a more accurate answer from CPA. Purely a guess from me. The cost basis and fair market value ("FMV") of the securities can change the outcome of this, but conceptually yes to your question being that the transfer of securities from Roth IRA to a Traditional IRA would be considered deductible as a new fund contribution. My logic is that they would treat it as if you sold the securities you're transferring then contributed the cash in and purchased the same securities. Does the brokerage even allow transfer of the securities directly from Roth IRA to the Traditional IRA with a carryover of basis? Assuming you made no IRA contributions this year and your Roth IRA securities have a FMV of $6,000. When you rollover I assume the brokerage will treat it as if there was a Roth withdrawal of prior contributions for $6,000 and a distribution of $6,000 to the Traditional IRA i.e. deductible.
Can you elaborate? Withdrawals of Roth IRA contributions are tax free and contributions to Traditional IRA are tax deductible with some exceptions of course. You sold some securities in your Roth IRA account and withdrew not in excess of your life to date Roth IRA contributions and then contributed that into a Traditional IRA account? That would sound deductible like new funds transferred in.
It would work, except one little problem: contribution limit to an IRA is $6,000 per year. You will not be able to contribute more than this amount to a Traditional IRA in a given year.
I wish to transfer the actual stocks from a Roth to a Traditional and count that as a Traditional IRA contribution.
This would not be possible. You could take a distribution from a Roth IRA, then make a contribution to a Traditional IRA, but you will be limited to $6K/yr.
You can convert a Roth IRA contribution (which would have been 6k or less) to a traditional IRA. the income tax deduction would be allowed assuming you meet the other requirements under the tax law