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Cut the tax on mandatory IRA withdrawals

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in Small Business Tax

Q: I have a carried-over capital loss of $6,500 from last year. Can I use this loss to offset some of my income from a required IRA distribution? S.B., Toms River, N.J.

A: Yes, within certain limits. A capital loss must first be used to offset any capital gains realized during the year. Then the loss can be used to offset up to $3,000 of ordinary income. Since your required distribution from the IRA is treated as ordinary income, you can use any excess loss to offset up to $3,000 of the distribution. You can still carry forward the extra $3,500 loss to next year. Tip: You can't use losses from investments inside the IRA to offset any capital gains or income.

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