Impact of custodial fees on Roth basis
When a mutual fund company deducts their annual custodial fee, do you reduce the Roth basis by this amount?
When a mutual fund company deducts their annual custodial fee, do you reduce the Roth basis by this amount?
Permalink Submitted by Alan Spross on Wed, 2010-07-07 01:22
No. Your Roth basis is only affected by your regular and conversion contributions and that number remains static if no further contributions or distributions are made to you. Changes in investment results can drop your Roth balance below your basis or add to the earnings amount which is the amount of your Roth value above your basis. Basis stays the same, but earnings come and go.
You may have the chance to pay the annual custodial fee from outside funds, and doing that will help your Roth hold it’s value. You may also have enough of these and similar costs to take a misc itemized deduction, but only if paid from outside funds. Having the fees deducted from the IRA works better for a TIRA than a Roth IRA because in a TIRA these fees are paid from pre tax funds, funds that will otherwise be taxable to you. But if deducted from a Roth, the fees will end up being paid from after tax funds if you assume that you will hold your Roth until it is qualified after 5 years and also at age 59.5.