Using Net Operating Loss in a Roth conversion
I have two traditional IRAs and a Roth. The traditional IRAs were conversions from a previous employer’s 401k and pension accounts, but my own self employment fed the Roth. I am currently still self-employed, but winding down into full retirement. While self-employed I amassed roughly $30,000 of Net Operating Loss (NOL), which my tax professional has been carrying forward year-over-year. My question is: Can I convert part of my traditional IRA funds into my Roth IRA and apply the NOL to the Roth conversion’s tax liability? My tax advisor says “yes”, but my financial advisor says “no”. I’m confused. Can anyone help? Bob R.
Permalink Submitted by David Mertz on Thu, 2019-01-31 21:24
NOL carryover does not offset any particular item of income on your tax return. (Perhaps that’s what the financial advisor meant.) Instead, NOL carried forward is reported as negative Other income on your tax return, so it offsets the aggregate positive income on your tax return, including the taxable income contributed to your AGI by the Roth conversion (which is what your tax advisor is telling you).
Permalink Submitted by Robert Riggs on Thu, 2019-01-31 22:17
Thanks. That clarifies things