Trading stocks in a Traditional IRA?

Question

I know that I would have to pay taxes on any capital gains that are made by trading stocks in a Trad IRA, but was wondering how long a loss would carry over. For instance, would I be able to protect 10K of gains made this year from the tax man with 10K of losses that happened a few years ago? Are the gains/losses from trading in a traditional IRA a cummulative thing that works out once the IRA is withdrawn from?

Answer 1

The previous answer is correct. Your last sentence is also correct, losses and gains are cumulative. In a traditional IRA in which you have taken a tax deduction for contributions, all withdrawals are taxed as ordinary income.

Therefore, someone who is investing for capital gains inside an IRA, and who anticipates a tax bracket greater than 15% upon retirement, may in some cases pay more taxes than if the investments were outside of the IRA.

I add that if you have a net loss when you take withdrawals, in that your accumulation is less than your contribution, you will not get any tax benefit from that loss.

If you made after-tax contributions and had a loss in excess of your after-tax contributions, that loss can be taken on Schedule A as a miscellaneous deduction, rather than as a capital loss.

Answer 2

If you are trading stocks in a self-directed traditional IRA, you do NOT pay CG tax on the gains and do NOT get to use any losses against ordinary income or carry forward any losses from year to year. The gains accumulate tax-free until they are withdrawn from the IRA and are then taxed as ordinary income.

Any gains or losses in an IRA exist within the vacuum of the IRA and have no affect on income outside of the IRA.

Answer 3

Gains or losses on stock trades in a traditional IRA are not reported on your tax return and have no tax consequence. When you withdraw money from the IRA, it will be taxed as ordinary income in the year you withdraw it.

In a sense the gains and losses work out, since it's only the net that remains in the IRA to be withdrawn.