Great question — and it's a very smart one, since not many people think about losses in the context of a mega backdoor Roth IRA conversion.
Short Answer:
No, if your after-tax 401(k) has losses when you roll it over to a Roth IRA, you cannot deduct the loss or use it to offset capital gains in a taxable account.
Here's Why:
When you roll over after-tax 401(k) money (via a mega backdoor) to a Roth IRA, the earnings portion is taxable income. But if the account has experienced losses, those are not treated as a deductible capital loss. Instead, the value of the assets being converted is simply lower — there's no recognized loss for tax purposes.
This is because:
The after-tax 401(k) is tax-deferred, not a taxable account.
Losses inside tax-deferred accounts (like 401(k)s, IRAs, etc.) generally do not flow through to your tax return.
The IRS doesn’t let you deduct losses inside retirement accounts unless very specific and rare conditions are met (see below).
Special Case: Losses in Traditional IRAs
In some very rare cases, if you fully distribute and close all IRAs of a certain type, and the total value is less than your basis, you might be able to claim a miscellaneous itemized deduction.
But these deductions were eliminated under the Tax Cuts and Jobs Act (TCJA) through 2025.
So in short: 401(k) losses are not capital losses, and you can’t use them to offset gains in taxable accounts.
最后这个special case的回答是和Bogleheads对上了： “As retiredjg indicated, the fact that Box 5 of the 1099R was limited to the amount of the distribution suggests that the excess basis has been retained in the after tax sub account for future use. You may or may not get to take advantage of future small gains being offset by such carryover basis.
In the past, accounts that were totally closed (1099R total distribution box checked) for less than the unrecovered basis would generate a potential misc deduction loss subject to the 2% AGI floor. That provision was wiped out by the TCJA until 2026 when it may be restored. Note that while the after tax sub account is treated as a separate account for some purposes, it is still just one portion of a 401k account, so even if the misc deduction is restored in 2026, it is the entire 401k account including the pre tax portion that would have to be valued at less than basis. Therefore, it is extremely unlikely that you will ever be able to claim such a misc itemized deduction.
I posted in a similar thread that these losses are treated differently according to the type of account. A Roth 401k balance rolled into a Roth IRA and valued at less than the basis specifically TRANSFERS the basis from Box 5 to the Roth IRA by increasing Roth IRA basis. Box 5 instructions are to show the actual basis not limited by the amount rolled out (unlike the 1099R that the OP received from the qualified plan). Even then you would not benefit by that unless you took a very large NQ Roth IRA distribution before your Roth IRA was qualified. The reasons for this differential treatment of Roth 401k distribution basis from basis in the pre tax account are not clear.
In summary, no possibility of a current deduction, but some possibility for a future benefit depending on plan accounting practices.”
Mega backdoor是指存after tax 401K，然后自己转Roth IRA。
Roth In-Plan Conversion是指存after tax 401K，然后自动转Roth 401K。
注意，after tax 401K不是Roth 401K。不是所有公司的401K都提供after tax 401K。不了解这两个概念的可以看这个十分钟讲清楚美国退休帐户的视频：
无论是mega backdoor还是Roth In-Plan Conversion，都是post tax to post tax，转出来的本金是不用再交税的，但在after tax 401K产生的earnings在转出来的时候要交税！
所以实际中都是越早转越好，因为钱在after tax 401K停留时间越短，一般来说earnings越少，税也越少。Roth In-Plan Conversion更是完全自动化，钱一进after tax 401K，秒转Roth 401K，完全不停留，保证没有任何earnings。
但螺丝螺帽网友提出了一个好问题，如果不是earnings，而是losses，又该怎么办？这个losses能用来抵消其他capital gain吗？
我还真不知道答案。我也没遇到这种情况，我自己操作这么多年都是钱一进after tax 401K，立马转Roth，因为Roth里的earnings就不用交税了。本着学习新知识的目的，在网上搜索了一波。Bogleheads还真有不少人讨论，比如
https://www.bogleheads.org/forum/viewtopic.php?t=269588
https://www.bogleheads.org/forum/viewtopic.php?t=378005
大多数的结论是：产生的losses都会“lost”，无法用来抵其他的capital gain。但一些券商会保留这些losses，而抵消来年mega backdoor或者Roth In-Plan Conversion产生的earnings。
有不对的地方，欢迎指正。学习到有趣的新知识总是令人愉悦的 ：）
我的理解， 在没有convert 到roth 401k的时段， 就当一般税后的投资， 所以， 年底有1099表， 上面有
盈利或者亏钱， 都是实打实的数字。
做税时候， 就可以加加减减了。所以， 这部分亏的是可以拉回的， 前提， 其他税后的投资有盈利。
进了roth 后， 不管盈利还是亏本， 都没有税收问题了。
Great question — and it's a very smart one, since not many people think about losses in the context of a mega backdoor Roth IRA conversion.
Short Answer:No, if your after-tax 401(k) has losses when you roll it over to a Roth IRA, you cannot deduct the loss or use it to offset capital gains in a taxable account.
Here's Why:When you roll over after-tax 401(k) money (via a mega backdoor) to a Roth IRA, the earnings portion is taxable income. But if the account has experienced losses, those are not treated as a deductible capital loss. Instead, the value of the assets being converted is simply lower — there's no recognized loss for tax purposes.
This is because:
The after-tax 401(k) is tax-deferred, not a taxable account.
Losses inside tax-deferred accounts (like 401(k)s, IRAs, etc.) generally do not flow through to your tax return.
The IRS doesn’t let you deduct losses inside retirement accounts unless very specific and rare conditions are met (see below).
Special Case: Losses in Traditional IRAsIn some very rare cases, if you fully distribute and close all IRAs of a certain type, and the total value is less than your basis, you might be able to claim a miscellaneous itemized deduction.
But these deductions were eliminated under the Tax Cuts and Jobs Act (TCJA) through 2025.
So in short: 401(k) losses are not capital losses, and you can’t use them to offset gains in taxable accounts.
最后这个special case的回答是和Bogleheads对上了：
“As retiredjg indicated, the fact that Box 5 of the 1099R was limited to the amount of the distribution suggests that the excess basis has been retained in the after tax sub account for future use. You may or may not get to take advantage of future small gains being offset by such carryover basis.
In the past, accounts that were totally closed (1099R total distribution box checked) for less than the unrecovered basis would generate a potential misc deduction loss subject to the 2% AGI floor. That provision was wiped out by the TCJA until 2026 when it may be restored. Note that while the after tax sub account is treated as a separate account for some purposes, it is still just one portion of a 401k account, so even if the misc deduction is restored in 2026, it is the entire 401k account including the pre tax portion that would have to be valued at less than basis. Therefore, it is extremely unlikely that you will ever be able to claim such a misc itemized deduction.
I posted in a similar thread that these losses are treated differently according to the type of account. A Roth 401k balance rolled into a Roth IRA and valued at less than the basis specifically TRANSFERS the basis from Box 5 to the Roth IRA by increasing Roth IRA basis. Box 5 instructions are to show the actual basis not limited by the amount rolled out (unlike the 1099R that the OP received from the qualified plan). Even then you would not benefit by that unless you took a very large NQ Roth IRA distribution before your Roth IRA was qualified. The reasons for this differential treatment of Roth 401k distribution basis from basis in the pre tax account are not clear.
In summary, no possibility of a current deduction, but some possibility for a future benefit depending on plan accounting practices.”
那个时候收到的 1099form， 我也没管过。
我的理解是当年的盈利和亏是加加减减的过程。
老公说， 因为是after tax 401k plan， 也许不一样。
我们这辈子不会再有机会了， 所以， 不想深究了
词只在Capital Gain/Loss的范畴里。
盈利部分如果转税前401K, 没有税的问题。
现在一次设定， 自动转， 好！
可我是再无机会了
从after tax 401 k 到 roth in plan conversion无缝隙
自己做不了。这是前几年的经历