Can I deduct losses when closing my Roth IRA accounts?

You're right to be confused because this is a commonly misunderstood area of tax law. To deduct losses in a Roth IRA, you would need to close ALL of your Roth IRA accounts and withdraw all funds. The key point is that your total distributions must be less than your total basis (the amount you contributed) across all Roth IRAs. For example, if you've contributed $25,000 across all your Roth IRAs over the years, but when you close all accounts and withdraw everything, you only get $20,000 back, you would have a $5,000 loss that could potentially be deductible. The challenge is documentation. You'll need to prove your basis (total contributions) to claim the loss. Without records from your old E*Trade/Robinhood accounts, this could be difficult. Try contacting Vanguard to see if they have the historical contribution records that transferred over.

After spending hours trying to understand Roth IRA tax rules for my situation, I found an AI tool called taxr.ai that was super helpful with explaining these complicated situations. I uploaded my statements from different brokerages (had a similar situation with accounts being transferred between companies) and it helped figure out my total contribution basis across all accounts. I think the website is https://taxr.ai and it analyzed all my documents to calculate the actual loss I could deduct. My issue was similar - had accounts at three different places and wasn't sure how to track my total contributions over time. The tool organized everything chronologically and showed me exactly what I'd contributed vs what I had now.

I was super skeptical about taxr.ai when I first read about it here, but I ended up trying it for my own Roth IRA situation. I had Roth accounts at Fidelity, Vanguard and an old one from a previous employer that I couldn't even remember the contribution amounts for. The tool actually saved me from making a huge mistake. I was considering closing all my accounts to claim a loss, but after uploading my statements, it showed me that while some investments were down, overall I was actually slightly positive when considering all accounts together. Would have been a disaster if I'd closed everything for no tax benefit and lost my Roth IRA space! It organized everything by year and showed me exactly where my basis tracking had gaps. Definitely worth checking before making any decisions about claiming Roth losses.

If you're trying to get answers from the IRS about this Roth IRA loss deduction situation, good luck getting through to them. I spent literally 4+ hours on hold trying to get clarification on this exact issue. After someone on Reddit recommended Claimyr, I tried it and got through to an IRS agent in about 15 minutes. The website is https://claimyr.com and they also have a video showing how it works: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained that to claim Roth IRA losses, you need Form 8606 and documentation showing your total contribution basis. She also mentioned that the loss isn't a direct deduction - it's considered a miscellaneous itemized deduction subject to the 2% AGI floor, which means it's much less valuable than I thought.

I need to eat my words about Claimyr. After posting that skeptical comment, I decided to try it myself because I was desperate to talk to someone about my Roth IRA situation. Figured I had nothing to lose since I'd already wasted hours on hold. It actually worked exactly as described. Got a call back in about 25 minutes (this was on a Tuesday afternoon), and got connected to an IRS agent who was super helpful. She confirmed what others have said - you need to close ALL Roth IRAs to claim a loss, and the loss is subject to the 2% AGI limitation as a miscellaneous itemized deduction, which makes it pretty useless for most people unless you have massive losses. The agent also said most people are better off keeping their Roth accounts open even with losses because the long-term tax-free growth potential usually outweighs any immediate deduction.

One thing nobody's mentioned yet - even if you do close all your Roth IRAs and have a legitimate loss, the deduction is considered a miscellaneous itemized deduction subject to the 2% of AGI floor. Since the Tax Cuts and Jobs Act suspended these deductions from 2018 through 2025, you currently CANNOT deduct Roth IRA losses at all! This is scheduled to change in 2026 when these deductions are supposed to come back, but for now, it's a moot point anyway.

I'm confused about something nobody's addressed yet. If I close my Roth IRA accounts and have a loss, how exactly do I claim it on my tax return? Which forms do I need to fill out? And will tax software like TurboTax handle this correctly?

This is a really complex situation that highlights why most tax professionals recommend against closing Roth IRAs just to claim losses. The key points everyone's covered are spot-on: 1. You'd need to close ALL Roth accounts across all institutions 2. The deduction is currently suspended through 2025 anyway 3. Even when available, it's subject to the 2% AGI floor limitation For your specific situation with the E*Trade → Robinhood → Vanguard transfers, I'd strongly recommend contacting Vanguard first to see what historical records they have. Many times when accounts are transferred, the contribution basis information travels with them. Also consider that even if you had a deductible loss, you'd be permanently giving up valuable Roth IRA contribution space. Once you close the accounts, you can't "reopen" them - you'd have to start fresh with new annual contribution limits. Given the current tax law suspension and the complexity of your multi-institution setup, you're probably better off keeping the accounts open and focusing on rebalancing or adjusting your investment strategy within the existing accounts.

Just wanted to add one more important consideration that might help with your decision-making process. Even if you could track down all your contribution records and calculate an exact loss, remember that Roth IRAs are designed for long-term retirement savings - typically 20-40+ years of potential growth. The tax-free compounding over decades is incredibly valuable. For example, if you have $15,000 currently in your Roth accounts that grows at an average 7% annually, that becomes about $225,000 in 40 years - all tax-free. Compare that to whatever deduction you might get (when it becomes available again in 2026) which would likely save you maybe a few hundred to a couple thousand dollars in taxes. The math almost never works out in favor of closing the accounts unless you have truly massive losses AND you're in a very high tax bracket. Most financial advisors would tell you to ride out the temporary losses and focus on your long-term retirement strategy instead. If you're concerned about your current investment performance, consider rebalancing within your existing Roth accounts or adjusting your asset allocation rather than closing everything.

This whole thread has been incredibly educational! As someone who's been contributing to a Roth IRA for about 5 years but never really understood the loss deduction rules, I had no idea it was this complicated. The key takeaway for me is that between the current suspension of miscellaneous itemized deductions through 2025, the requirement to close ALL Roth accounts, and the lost opportunity for decades of tax-free growth, claiming Roth IRA losses is almost never worth it for regular investors like us. I'm curious though - are there any specific scenarios where this might actually make sense? Like if someone had contributed $50,000+ over many years and their accounts were now worth only $10,000 due to really bad investment choices? Even then, giving up that Roth space forever seems like it would hurt more in the long run. Also, for anyone dealing with scattered records across multiple brokerages like the OP, it sounds like the first step should always be contacting your current providers to see what historical data they have before even considering any drastic moves.