Can I deduct Roth IRA capital losses on my taxes?

Unfortunately, you can't deduct losses in a Roth IRA the same way you would with regular taxable investment accounts. The IRS doesn't allow you to claim capital losses inside tax-advantaged retirement accounts like Roth IRAs. The tax-free growth advantage of Roth IRAs comes with this downside - losses aren't deductible. Since you never paid taxes on the earnings (had there been any), the IRS doesn't let you deduct the losses either. It's essentially a trade-off in the tax code. If you had experienced these losses in a regular taxable brokerage account, then you could use them to offset capital gains and deduct up to $3,000 against ordinary income each year. But retirement accounts like IRAs and 401(k)s operate under different rules.

After dealing with a similar situation last year, I found an amazing tool that helped me understand all the tax implications of my retirement account losses. Check out https://taxr.ai - it analyzes your complete financial situation and tells you exactly what can and can't be deducted. I uploaded my statements and it immediately clarified that while Roth IRA losses aren't deductible, there were other aspects of my tax situation I could optimize given what happened. The tool even suggested some strategies for my remaining investments that have helped me recover some of the losses through other tax efficiencies. Would have taken me hours of research to figure this out on my own.

Just wanted to follow up - I tried https://taxr.ai after seeing the recommendation here. It really helped clarify my retirement account situation! I uploaded my Roth IRA statements and tax returns, and it showed me exactly why my losses weren't deductible (with the actual IRS code references) but also identified some other tax planning opportunities based on my overall financial situation. Super helpful for planning my investment strategy going forward. The document analysis was impressively accurate - it caught details I wouldn't have thought to consider.

If you're trying to get clarification directly from the IRS on Roth IRA loss questions, good luck getting through to anyone! I spent TWO WEEKS trying to reach someone at the IRS. Always "high call volume" and disconnects. Then I found https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c After talking with the IRS representative, they confirmed what others are saying - Roth IRA losses aren't deductible, but they gave me specific guidance about my situation and what documentation I needed to maintain for previous contributions. Saved me hours of frustration and gave me definitive answers straight from the source.

I have to eat my words about Claimyr. After complaining here, I decided to try it because I've been trying to get through to the IRS about a similar retirement account issue for months. The service actually worked exactly as described. Got a call back in about 25 minutes, and was connected to an IRS agent who answered my questions about Roth IRA losses and helped me with another tax notice issue I'd been stressing about. Never thought I'd get through to a real person at the IRS without taking a day off work to sit on hold. Definitely worth it for the time saved and stress reduction alone.

Just to clarify something important that hasn't been mentioned yet - there was actually a provision in the tax code that allowed for Roth IRA losses to be claimed as a miscellaneous itemized deduction, but only if you closed ALL your Roth IRAs and the total amount you withdrew was less than your basis (total contributions). However, this deduction was eliminated by the Tax Cuts and Jobs Act from 2018 through 2025. So currently there's definitely no way to deduct these losses.

My tax advisor gave me different advice about this. He said I could actually deduct the loss if I liquidated ALL my Roth accounts (not just the one with losses). Has anyone done this? I have multiple Roth accounts and considering consolidating anyway.

Slightly off topic, but did you consider rebalancing your portfolio instead of closing the account? Market's been really volatile but historically rebounds long-term. Might have been better to adjust your investment mix rather than locking in the losses. Just my 2 cents.

I completely understand the frustration and stress you went through - losing that much money in a Roth IRA is really tough, especially when you can't even get the tax benefit of deducting the losses like you could with a regular investment account. Since you're planning to start over with a more conservative approach, you might want to consider target-date funds or a simple three-fund portfolio when you reopen your Roth later this year. These tend to be less volatile and automatically rebalance for you, which could help avoid the emotional stress that led to locking in your losses this time. Also, when you do start contributing again, remember you can still put in $7,000 for 2024 (assuming you're under 50) even though you closed your previous account. The contribution limits are annual, not per account. Taking time to educate yourself before jumping back in is definitely the smart move - your future self will thank you for developing a solid long-term strategy this time around.

I'm really sorry to hear about your losses - that's a significant amount of money and I can understand why you felt the need to stop the bleeding. Everyone here is correct that Roth IRA losses aren't deductible under current tax law. One thing that might help for the future: consider setting up automatic contributions with dollar-cost averaging instead of putting in large lump sums. When you invested $22,500 all at once in 2021, you were essentially making a big bet on market timing. If you had spread those contributions over 12-24 months, you would have bought shares at different price points, which typically reduces volatility. Also, before you reopen a Roth IRA, you might want to establish an emergency fund in a high-yield savings account first. This way, if life throws you a curveball, you won't be tempted to touch your retirement investments during market downturns. Having that financial cushion can make it much easier to ride out the inevitable ups and downs of the market. The silver lining is that you're young enough to recover from this setback, and the lessons you've learned about risk tolerance and emotional investing are valuable - even if they came at a steep price.

I went through something similar a few years ago and completely understand the emotional toll of watching your retirement savings evaporate. While it's frustrating that Roth IRA losses aren't tax-deductible, I want to echo what others have said about this being a valuable (albeit expensive) learning experience. One thing that helped me after my own investment losses was to think of it as "tuition" for learning about investing and risk management. The knowledge you've gained about your risk tolerance, the importance of diversification, and the dangers of emotional decision-making will serve you well for decades to come. When you do decide to start investing again, consider starting with just $100-200 per month rather than large lump sums. This approach helped me rebuild my confidence gradually and avoid the "all or nothing" mentality that got me in trouble the first time. Also, many brokerages now offer fractional shares, so you can diversify even with smaller amounts. The fact that you're taking time to educate yourself before jumping back in shows real wisdom. Most people just repeat the same mistakes. You're going to come back stronger and more knowledgeable than before.

I'm really sorry this happened to you - losing $14,100 in your Roth IRA is incredibly painful, especially when you were trying to do the right thing by saving for retirement. Unfortunately, as others have confirmed, Roth IRA losses cannot be deducted on your taxes under current law. What you experienced is actually more common than you might think. Many people who started investing during the 2021 market highs faced similar losses when everything crashed in 2022. The timing was just brutal for new investors. Since you mentioned you're planning to start over with a more conservative approach, here are a few things that might help: First, consider using a "core-satellite" strategy where you put most of your money in boring, stable index funds (the "core") and only allocate a small percentage to riskier investments (the "satellites"). This can help you participate in market growth while limiting downside risk. Second, when you do restart your Roth IRA, you might want to implement a "circuit breaker" rule for yourself - like promising never to check your balance more than once per quarter, or setting up automatic investments so you're not tempted to time the market. The silver lining is that you learned this lesson relatively early in your investing journey. Many people don't discover their true risk tolerance until they're much closer to retirement, when they have less time to recover. You still have decades to build wealth, and the discipline you develop from this experience will serve you well. Hang in there - this setback doesn't define your financial future.