The Roth IRA loss recognition rule is an important financial topic. If you own any type of IRA account, you need the information that is outlined below.

The IRA loss recognition rule applies separately to each kind of IRA, including Roth IRAs. Thus, to recognize a loss in a Roth IRA, all amounts must be distributed from all Roth IRAs (but not traditional IRAs) owned by the taxpayer, and to recognize a loss in a traditional IRA, all amounts must be distributed from all of the traditional IRAs owned by the taxpayer (but not Roth IRAs).

If a Roth IRA loss may be claimed, it is as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A, Form 1040. Per the TCJA, deduction of Tier 2 expenses is suspended for years 2018 through 2025, so no Roth IRA loss is deductible during this period.