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Are dividends/cg from IRA accounts taxable income ?....
Old 06-25-2018, 10:46 PM   #1
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Are dividends/cg from IRA accounts taxable income ?....

...

I’d guess yes, but wanted to check with this forum.
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Old 06-25-2018, 10:47 PM   #2
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Yes, but only when withdrawn.
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Old 06-25-2018, 11:09 PM   #3
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All money from an IRA you put in (if tax deducted when going in) is taxable when coming out.
All earnings from an IRA are taxable as income, and it does not matter if was interest or Capital gain.

Money you put in an IRA that was post-tax money put in (as in not tax deductible) can be withdrawn tax free.

All dividends and capital gains within the IRA, that stay in the IRA are not taxable.
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Old 06-26-2018, 05:30 AM   #4
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Yes, but only when withdrawn.
+1, unless it is a Roth.
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Old 06-26-2018, 05:57 AM   #5
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Originally Posted by wanaberetiree View Post
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I’d guess yes, but wanted to check with this forum.
Not when they occur. And there is no special tax rate for qualified dividends or capital gains occurring in an IRA. Any money withdrawn from an (non Roth) IRA is taxed as ordinary income regardless of its source, including the initial tax-deferred contributions.

An exception is if after-tax contributions were made - those aren’t taxed but it’s a drawn out process as that “basis” is prorated against the rest of the IRA.
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Old 06-26-2018, 06:54 AM   #6
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Originally Posted by wanaberetiree View Post
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I’d guess yes, but wanted to check with this forum.
No, interest and dividends inside an IRA are not taxable income.

Withdrawals from a tIRA would be taxable whether the withdrawals are of interest, dividends or principal (assuming the tIRA is 100% deductible contributions.... if less than 100% deductible contributions then only partially taxable). Withdrawals from a Roth are not taxed (if you are over 59 1/2).
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Old 06-26-2018, 11:09 AM   #7
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It's a little more complicated than some responses have suggested.

But take a look at the 2017 version of Form 1040 entries 15a and b, and 16a and b:



Clearly, some things are taxable (15b, 16b) and some are not (15a-15b, 16a-16b). It is up to the taxpayer to read the IRS publications and Form 1040 instructions to figure it out.

Sure, some responses on an internet forum are helpful, but they can also leave out the details.

But dividends and capital gains within an IRA that are not withdrawn from the IRA are not taxable. Withdraw them, then it can get complicated or not.
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Old 06-26-2018, 11:22 AM   #8
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If not Roth IRA, they are taxed during the year of withdrawal at the high "ordinary income" rate. For the FIRE crowd, a tIRA unfortunately converts low-tax dividends and cap gains into high-tax ordinary income.
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Old 06-26-2018, 11:44 AM   #9
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If you have a rollover IRA from a 401k (or equivalent) plan, then its withdrawals are taken as ordinary income, too. But, the contributions which went into them originally would have been taxed as ordinary income. And, if you put money into them back in the 1990s as I did, then the marginal rates were much higher than they are today. My (federal) marginal rate back then was 28%, which fell to 25% starting in 2001 and has since fallen to 22% this year. (My state income tax rate has also fallen.) This greatly offsets any increase in taxation due to taking out all the money as ordinary income instead of some combination of ordinary income and the more lightly taxed dividends and cap gains. And that doesn't include any company matching funds which were the closest thing to "free" money you can find.


A quick and simple numerical example: I contributed $100 to the 401k back in the mid-1990s and it was matched at 75%, so I had $175 working for me. The tax benefit meant that it "cost" me only $72 ($100 - 28%). I've already made 143% on my investment at Day One. Even when taxed as ordinary income at 22% I still clear $137 for a 75% return.
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