June 7th, 2007

IRA And Double Tax Deduction

I came across an article a couple of days ago that shows how to get a double tax deduction when you contribute to your IRA account.

Next time when you want to contribute money to your IRA account, don’t use your cash to fund it. Consider selling your stock that has declined in value, up to the amount you want to contribute; and use that money instead. Your contribution to IRA is tax-deductible and you can write-off the capital loss from the stock sales as well.

And the best part is if you like the stock and you want to hang on to it, you can always buy the stock back in your IRA account. Since the IRS treat you and your IRA account as a separate entity, the ‘Wash Rule’ does not apply.

I wish I had known this earlier. Well, my mistake … your gain.