I have a traditional 401k. I know that the contributions and growth are deferred until I retire. When I do start to pull out money, are all the capital gains taxes due? Do I have to keep track of all the buys/sells I've made?
2007-05-31 12:44:16 · 6 answers · asked by Shasta McNasty 2007 2 in Business & Finance ➔ Taxes ➔ United States
You do not have to keep track of your buys & sells. It does not matter if you do short term or long term gain. After retirement when take out money every year, it will be treated as regular income (like your salary) and taxed according to your tax brakcet in that year.
2007-06-03 09:28:36 · answer #1 · answered by Human07 2 · 0⤊ 0⤋
You are required to start taking money out when you become 70 1'2, and are penalized if you start before 59 1/2.
The money in the account has never been taxed, and you will be taxed each year on the amount withdrawn. The amount of tax you pay will depend on the bracket you are in at the time of withdrawal.
Capital gains in the account have no bearing, since the account grows on a tax deferred basis while you leave it in the 401k plan.
There is a lot more to know about planning with this account, and you have many choices available.
2007-05-31 13:22:30 · answer #2 · answered by luckyzimmy 2 · 1⤊ 0⤋
The amount of tax will first depend on your age when you take it out. You need to be over 59 1/2 years old before you can make a distribution without a 10% penalty. After that the annual distribution is added to your ordinary income and will be taxed at the ordinary income tax rate at the time you receive the money. At 70 1/2 most folks are required to start making distributions and that will be taxed at the ordinary income rate. Don't worry about any of the transactions withing the fund. They will send you a 1099 each year telling you and the IRS what the distribution amount was.
2007-05-31 13:30:32 · answer #3 · answered by ? 6 · 0⤊ 0⤋
Capital gains taxes don't apply, and no, you don't have to keep track of the buys and sells. You'll pay tax as ordinary income on the amount you withdraw each year.
2007-05-31 13:36:51 · answer #4 · answered by Judy 7 · 0⤊ 0⤋
When you take a distribution from your 401k, you take it in cash. You do not report the buys and sells inside your 401k. Any cash received from the 401k is taxed as ordinary income, even if it came from a stock sale.
2007-06-01 17:22:14 · answer #5 · answered by ninasgramma 7 · 0⤊ 0⤋
Never pull it out. Borrow against it intstead and never pay capital gains.
2007-05-31 12:47:33 · answer #6 · answered by Anonymous · 0⤊ 4⤋