401K loss last year and taxes

danger boy

Can my 401k loss be claimed somewhere when I file my taxes? Someone said no.. because it's a long term loss we're going through.. but I don't know for sure.

some of your savvy tax guru's please set me straight.. well so to speak. :rolleyes:

LessisNevermore

Not a guru by any means, but since that money, and whatever gains you might get, aren't subject to taxes until it's taken out, I wouldn't think you could claim the "loss", either.

bobman1235

Definite no. It's not a loss until you cash it in, and 401k is especially different because it isn't taxed until you cash it in.

If you could claim a loss on it this year, that would mean every year you had a GAIN you would have had to have claimed it as income, which obviously you ddin't and it wasn't.

Pauly

yeah its only on paper, so its just a "paper loss"

mhardy6647

paper losses don't count. fortunately, neither do paper gains.

reeltrouble1

why would you want to get a loss on something you never paid tax on as a gain, DB, you have too many Raindrops Falling On Your Head. You would have to get the Congress to amend the tax law to allow for a tax credit for losses in a 401 or such, not a bad idea come to think of it. So I suppose its now Sunshine On Your Shoulders DB if you can getter done...just hurry.

RT1

shack

I know the feeling. I actually have a 101K now.

My wife decided years ago that see just wanted to keep her retirement funds in plain old bank IRAs (basically CDs) and would not listen to her husband to invest the funds more aggressively. Smart lady! She hasn't lost a penny of it EVER and is still earning 3.5% THIS year and earned 5.5% LAST year.

And no, the losses are not tax deductable. Investment losses can only be used to off-set gains in other investments. I am not sure about the tax ramifications when the funds are withdrawn and one has actually lost more than they contributed. I'm not sure that is even covered in the tax code, because I'm not sure it was ever anticipated as a possibility.

kn505

Most of the 401k contributions for most people are from pretax incomes. Therefore, gains or losses on these 401k don't matter. The distributions of these 401k will be treated as incomes.
For those 401k contributions with after-tax incomes, I would think that the loss on distributions would be tax deductible.

thuffman03

I would think the only way would be to pull out all of your money in the 401k and if that is less than the dollar amount you put in you could write the loss over the next several years. The IRS will allow you to write off a loss up to a specific dollar amount each year.

Though I am not a CPA or a Lawer so don't take what I say as bing correct. I did loose some money a few years ago on some stocks and I was able to write the loss off.

wingnut4772

Not unless you cashed it. I lost $7500 on stocks and I got to claim half this year , half next.

PolkWannabie

... and even then from a tax perspective it's not a loss as there was no tax paid on any of the money in a 401K i.e. not on the original deposits and not on any gains or losses ... When you start taking money out however then it will ALL be taxed ...

polktiger

Polkwannabie has the right answer, and just to clarify...

You can only have a loss if you have a "basis" you have no "basis" in your 401(k) since the contributions are pretax. So you could put $1million in the 401(k) it could grow to $5million, the market crashes and you pull out all your money which is now $1,000. You will PAY tax on the $1,000 you withdraw. It is as if you never had the $1million (or the $5million.)

I have never looked it up, so I am not sure, about the rules for Roth IRAs and regular IRAs with non-deductible contributions.

danger boy

ahhhh ok thanks. yeah it sounded to good to be true.