I've elected to implement the "Re-invest Capital Gains" option for my mutual fund. Are these gains deductible form my adjusted Gross income?
I assume that if I took the gains as cash I would have to pay income tax on them.
is this right?
Thanks,
Les
2007-12-27 02:23:55 · 6 answers · asked by Les T 2 in Business & Finance ➔ Taxes ➔ United States
You don't claim this amount if it's in an IRA - growth is tax sheltered until you withdraw the money, then it's treated as ordinary income.
You are correct that if the mutual fund was NOT in an IRA, you'd pay tax on the amount of the cg distribution in the year it's distributed, but that doesn't apply to IRA's.
2007-12-27 02:29:50 · answer #1 · answered by Judy 7 · 2⤊ 0⤋
All the earnings from your IRA are ordinary income, regardless of their source (such as interest, dividends, capital gains distributions etc.).
You will not receive a 1099 for the earnings inside an IRA. You will only report contributions to the IRA, and distributions you take from the IRA, on your tax returns.
The IRS does receive an annual report of the value of your IRA, but you do not report it to them directly, it is reported by the trustee on Form 5498.
2007-12-27 10:30:19 · answer #2 · answered by ninasgramma 7 · 0⤊ 0⤋
No you cannot. I assume you have a regular IRA where you put in pre-tax dollars. Therefore you have to pay taxes (on the full amount withdrawn) when you take the money out, but you do not have to pay taxes if you leave the money in your account. In contrast, if you had a regular brokerage account you would have to pay taxes on the gain only when you sell since you already paid taxes on the principal before you deposited it. If it is a ROTH IRA and you meet all the criteria you may not have to pay taxes on the gain, but again, that was after-tax dollars used to invest. Talk to your accountant.
2007-12-27 10:29:00 · answer #3 · answered by M L 3 · 0⤊ 0⤋
Money in an IRA is governed by IRA rules. The tax is charged when you take a distribution.
Capital Gains Distributions on a regular non-IRA account would be ADDITIONAL income, not a deduction. You would get a 1099-DIV at the end of the year. (It's still income even if reinvested immediately.)
2007-12-27 10:27:07 · answer #4 · answered by Anonymous · 2⤊ 1⤋
NO
As an american you always support the IRA
2007-12-27 10:27:24 · answer #5 · answered by Anonymous · 1⤊ 2⤋
No
2007-12-27 10:26:13 · answer #6 · answered by daryll39 1 · 2⤊ 1⤋