Tax Planning/IRA cash in


Hi Mr. Arnoff, my wife and I are over 59 1/2 now and have small IRA's.  We bought a rental house recently and will show a loss because it is late in the year.  If we cash in our IRA's, will the rental investment loss help reduce our tax liability on the IRA's?

Thank you for your time,

David, In a word, "yes" but hopefully, this medium of communication will make it clear.  

The top half of page 1 of Form 1040 is a bucket of all your income from all sources, including categories that create a negative number.  All the plusses and minuses will come to a grand total of your income.  After your income, you have adjustments to income (bottom of 1040) and on page two you have your standard or itemized deductions and your personal exemptions.  What is left is, theoretically, your taxable income.

All things being equal, if you are simply thinking that one item (rental losses) will offset another item (IRA) and that will reduce your taxes, then the answer is yes.  But you have to include all other factors to make sure the answer is correct in your case.

I hope this complicated explanation answers your original question.

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As an Enrolled Agent, I am fully capable of providing tax advice as it relates to personal and business income taxes. Enrolled Agents are the only Federally licensed tax practitioners and are admitted to practice before all administrative functions of the IRS. My specialty is working with small business owners who file Schedule "C" and helping them to structure their business in such a way as to maximize as many tax advantages as possible. I also enjoy working with individuals who have both routine as well as complex tax situations. I prefer to concentrate on individuals and small business tax planning.


I have a 25 year background in financial services including tax, bookkeeping, insurance, real estate and securities. I was previously the Chief Financial Officer of a local and national franchise organization. I am currently semi-retired, but used to own (in partnership with another EA) an individual and small business financial engineering firm where I work with nearly 2,500 individuals and small business owners in nearly every state and almost every continent, assisting them in all aspects of their tax and financial well-being. I have prepared or reviewed more than 8,000 tax returns in my career.

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