Do I have to pay taxes on dividends that I receive from stocks in my Roth IRA? I'm aware that I won't pay taxes on my money if I take it out after age 59.5 or if I take out less than or equal to the principal amount. Does this mean I can cash dividend checks and use this cash to make purchases from my Roth IRA without any taxes? Thanks in advance.

  • @dave_thompson_085 - indeed, I'll edit. And a reminder that (paying down) principal is your pal in the journey of good finances. And 'loose' rhymes with 'moose'. (I'll delete this shortly.) Commented Mar 22, 2019 at 15:23

2 Answers 2


The dividends from assets within an IRA are still owned by the IRA. A dividend "check", if sent to you, is considered a distribution of funds. More important, it simply shouldn't happen. The dividend stays in the IRA, and if not automatically reinvested in additions shares, is available as funds to invest in another stock or other investment within the IRA.

  • Thanks. So if I set up my Roth IRA so that the dividends are held in the IRA, can I then withdraw them tax free up to the amount of the principle?
    – user780483
    Commented Mar 21, 2019 at 20:00
  • The accumulated dividends are part of the account. You can always withdraw up to your original deposit. Dividends are not a 'deposit'. I hope that's clear. Commented Mar 21, 2019 at 20:03
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    You deposited $10K. Some time later, it's worth $20K. You can withdraw $10K any time. The withdrawn $10K can be from sales proceeds, dividends, or interest over the years. You don't need to identify specific dollars, only be ware of the limit. Commented Mar 21, 2019 at 20:21
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    @user780483, you also seem to be misunderstanding the entire point of a Roth IRA, which is that you pay taxes on the money before you make your initial contributions, and then you don't pay taxes on distributions after 59.5. You can take out the amount you contributed at any time, even before the retirement minimum, but you are limited in your contributions. Commented Mar 21, 2019 at 22:43
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    @chrylis+Joe nit: you can take out without tax&penalty contributions and converted-from-trad amounts regardless of 59.5 but only after the Roth has been open 5 years. Related money.stackexchange.com/questions/74763/… (mine) Commented Mar 22, 2019 at 14:09

By law, any distributions that you take from a Roth IRA are deemed have first come from your contributions and then from your accumulated earnings on those contributions. "But, but," you splutter, "I specifically instructed the IRA custodian to sell only those shares from my mutual fund that were purchased with dividends and to send me the cash from those. So I did withdraw the dividends and leave the contributions still in the Roth IRA! So there!" Bzzzt! Thanks for playing. What you told the IRA custodian to do is irrelevant because you can only deposit cash into an IRA and get back only cash from it, and the cash that you got out is deemed to be a withdrawal of contributions first (in the order that they went in), and only if the withdrawal exceeds the total contributions that you made are you deemed to have withdrawn some of the dividends. The latter part can incur a penalty for early withdrawal. Withdrawal of contributions is tax-free and penalty-free.

  • "get back only cash from it" - Wait, what? I had an inherited IRA, in which I bought Apple at $5 quite a few splits ago. I took the distribution "in-kind" and paid tax on the withdrawal, but no need to sell or repurchase the shares. Deposits? Cash only. Distributions, in-kind is ok. Commented Mar 21, 2019 at 20:58
  • @JoeTaxpayer For simplicity, I did not drag in the in-kind distribution into my answer but for the record, you must have paid taxes based on the closing price of the shares on the day that they were distributed to you. It is as though the custodian sold the shares at the closing price and gave you the cash, and you promptly re-bought the same shares at the closing price, all without anyone having to pay brokerage fees for the implicit selling and buying. So yeah, add in the complication if you wish. Commented Mar 21, 2019 at 21:07
  • For purposes of this question, understood. I was reflecting back to other questions that talked about RMDs as messing up one's allocation, and required far more thought than is really needed. But, yes (and +1) for the answer. Commented Mar 21, 2019 at 21:53

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