are short term capital gains taxable in a traditional IRA?
lets say I have $5000 in a Traditional IRA. I am over 65. For sake of argument, I invested the $5000 in options yesterday, and they did well...I sold them at a profit today, and I now have $1000000 in my account! If I withdraw 500000 tomorrow, will I be taxed on that amount as ordinary income, or will I have short term capital Gains taxes to contend with?
Answers
989 points
rvilmur answered 8 months ago …
All money coming out a traditional IRA, minus the already taxed fraction that you contributed, is taxed as ordinary income. You pay nothing until money is withdrawn.
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122 points
twitham answered 8 months ago …
No they are not. Short term capital gains, losses and all of the other nuances you would normally have to keep track of, happen within the IRA with out need for documentation in your taxes. You pay taxes on money you withdraw as ordinary income. Using the stock market to increase the value of your IRA and avoid all the paperwork is great! A self regulated IRA account allows you to do this. Just remember, you can lose it also.
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102 points
inventiveone2009 answered 8 months ago …
You will have short term capital gains taxes on your earnings. Since you are over 65, no penalty for withdrawal. Ordinary income is that income that would be earned in the ordinary course of business in the form of salary or net taxable income from an unincorporated business---both of which would also be subject to self-employment (social security) tax.
Short or long term capital gains do not effect or count against the amount of ordinary (earned) income that may determine whether or not your social security pension is reduced in kind by earning over the allowable limit
