0

Wikipedia about Roth IRA says about its differences from traditional IRA

Transactions inside a Roth IRA (including capital gains, dividends, and interest) do not incur a current tax liability.

What does a current tax liability mean?

Do transactions inside a traditional IRA incur a current tax liability?

  • That sentence in Wikipedia is badly misplaced in the "Differences from Traditional IRAs" section since it invites the inference that,_ in contrast to Traditional IRAs_, transactions within a Roth IRA do not incur a current tax liability. Transactions within a Traditional IRA also do not incur a current income tax liability. – Dilip Sarwate Jan 16 '17 at 14:31
3

Current tax liability means that you'd have to pay taxes on the capital gain, dividend or interest incurred by the transaction. In some cases, there may be a portion withheld to cover the taxes in some cases.

Do transactions inside a traditional IRA incur a current tax liability?

No, though there is a deferred tax liability as all distributions from a Traditional IRA are taxed as ordinary income.

| improve this answer | |

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.