Author Topic: Can you IRA double dip?  (Read 4065 times)

Jags4186

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Can you IRA double dip?
« on: February 16, 2015, 09:52:15 AM »
I've been thinking about this.

Let's say you deposit on January 2 $5500 to a Roth IRA.  Say this grows to $6000 by December 31st. Can you withdraw the $5500 contribution, leave the $500 gains in your Roth IRA, deposit the $5500 into a traditional IRA and take the tax deduction for the year?  This would shield 1 years of gains from taxes forever indefinitely...and be endlessly repeatable. Thoughts?

johnny847

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Re: Can you IRA double dip?
« Reply #1 on: February 16, 2015, 10:02:32 AM »
No, because the contribution limit for IRAs is $5500 combined across all of your IRA's, whether they are Roth or traditional, or held at as many custodians as you would like.

dandarc

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Re: Can you IRA double dip?
« Reply #2 on: February 16, 2015, 10:04:19 AM »
If you recharacterize, you have to transfer earnings as well.

johnny847

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Re: Can you IRA double dip?
« Reply #3 on: February 16, 2015, 10:14:05 AM »
If you recharacterize, you have to transfer earnings as well.
OP is not talking about a recharacterization, OP is talking about withdrawing the principal contribution from a Roth IRA, which you can do at any time without tax or penalty.

zolotiyeruki

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Re: Can you IRA double dip?
« Reply #4 on: February 16, 2015, 10:25:28 AM »
No, because the contribution limit for IRAs is $5500 combined across all of your IRA's, whether they are Roth or traditional, or held at as many custodians as you would like.
I think the OP's question is this:  If you withdraw the contribution in the same year you make it, does it "undo" the contribution from the perspective of the contribution limits?

Jags4186

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Re: Can you IRA double dip?
« Reply #5 on: February 16, 2015, 10:29:14 AM »
No, because the contribution limit for IRAs is $5500 combined across all of your IRA's, whether they are Roth or traditional, or held at as many custodians as you would like.
I think the OP's question is this:  If you withdraw the contribution in the same year you make it, does it "undo" the contribution from the perspective of the contribution limits?

Yes that is the question.  Thank you for being more succinct than I was. 

Jags4186

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Re: Can you IRA double dip?
« Reply #6 on: February 16, 2015, 10:38:27 AM »
http://www.rothira.com/blog/can-you-return-withdrawn-roth-ira-contributions

according tot his, looks like you can...has anyone given any consideration to doing this?

Cromacster

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Re: Can you IRA double dip?
« Reply #7 on: February 16, 2015, 10:53:08 AM »
I do believe there is a 60 day window to withdraw and re contribute to your Roth without affecting your contribution limits.  So if you feel confident enough to make a greater return within 60 days, go for it.......

http://www.rothira.com/blog/can-you-return-withdrawn-roth-ira-contributions

according tot his, looks like you can...has anyone given any consideration to doing this?

There's really no point to this article.  All it says is, Whether or not you withdraw contributions, you have until the April deadline to contribute to your Roth.

dandarc

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Re: Can you IRA double dip?
« Reply #8 on: February 16, 2015, 10:56:59 AM »
http://www.irs.gov/instructions/i8606/ch01.html#d0e518

Read up on return of contributions - note that you must take the earnings or losses with the withdrawal.

I suspect in your example, to get $5500 back, you'd actually withdraw ~$5041 of contributions, and your 9% gain would be the other.  Then yes, I you could put $5041 into the traditional IRA.

Jags4186

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Re: Can you IRA double dip?
« Reply #9 on: February 16, 2015, 11:03:27 AM »
http://www.irs.gov/instructions/i8606/ch01.html#d0e518

Read up on return of contributions - note that you must take the earnings or losses with the withdrawal.

I suspect in your example, to get $5500 back, you'd actually withdraw ~$5041 of contributions, and your 9% gain would be the other.  Then yes, I you could put $5041 into the traditional IRA.

aha.  okay then the answer is no you cannot to your advantage at least.  it was a good thought!

johnny847

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Re: Can you IRA double dip?
« Reply #10 on: February 16, 2015, 11:36:05 AM »
http://www.irs.gov/instructions/i8606/ch01.html#d0e518

Read up on return of contributions - note that you must take the earnings or losses with the withdrawal.

I suspect in your example, to get $5500 back, you'd actually withdraw ~$5041 of contributions, and your 9% gain would be the other.  Then yes, I you could put $5041 into the traditional IRA.
No, this is completely wrong. When you withdraw money from a Roth IRA, it is always accounted for as saying you withdraw your contributions first. So in the OP's example, the OP would only withdraw contributions, not earnings.
EDIT: Sorry dandrac, I read too quickly and didn't realize you were talking about return of contributions, which are different from withdrawals.

Additionally, in the example the OP provide, OP cannot put $5041 in the traditional IRA in the same year. In fact the OP cannot put any money into a traditional IRA in that year.

Did you guys completely ignore what I said earlier?
No, because the contribution limit for IRAs is $5500 combined across all of your IRA's, whether they are Roth or traditional, or held at as many custodians as you would like.
Once you've contributed $5500 to any IRA, that's it for the year. You've filled your contribution limit for the year. You cannot contribute $5500 to a Roth IRA and $5500 to a traditional IRA in the same year.
« Last Edit: February 16, 2015, 11:51:10 AM by johnny847 »