IRAs are not subject to capital gains tax
Editor, Times-Dispatch:
Correspondent of the Day, Alan Machenburg ("Raising capital gains tax isn't such a good plan") says that we should worry about possible increases in the capital gains tax if you have an IRA. I agree that is an undesirable plan, but not for the reason given.
IRAs are not subject to the capital gains tax. They are tax-sheltered. Gains and dividends from funds or stocks invested within your tax-sheltered accounts are not taxed. If you roll the gains over to a regular account and invest those in funds, yes, you have to pay capital gains taxes, but why would you do that?
If you move funds from an IRA to a regular account, which would mean paying the tax on the value, capital gains derived from those funds while in the regular account would then be taxed. You could avoid that if you instead transfer them to a Roth IRA. Then your capital gains would not be taxed. The only way raising capital gains taxes would affect you would be if you had non tax-sheltered securities.
At age 70½ you will need to start taking RMDs (required minimum distributions) from your tax-sheltered accounts. Those are not capital gains. They are ordinary income, and are taxed as such. The same is true if you take a withdrawal from a tax-sheltered account, either cash or simply move securities to your regular account.
So don't make your political decision on that advice. Play it smart instead.
Al Warfield.
North Chesterfield.
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