How Are IRA Gains Taxed?
Question: If I convert from a traditional IRA to a Roth, is the gain considered ordinary income or a long-term capital gain? Answer: The gain in your IRA is taxed as ordinary income. So, your federal income tax rate can be as high as 35%. ^ top IRAs and Unearned Income Question: I am single and retired with an AGI well under $105,000 but no earned income for 2009. Can I contribute to a Roth IRA for this year? Answer: Unfortunately not. Annual contributions to Roth IRAs, just like traditional IRAs, can only be made for years when you have earned income. However, assuming your AGI is under $100,000 this year, you can convert your traditional IRA into a Roth if you are willing to pay the up-front tax hit. There is no earned income requirement for conversions. ^ top SmartMoney.com © 2009 SmartMoney. SmartMoney is a joint publishing venture of Dow Jones & Company, Inc. and Hearst SM Partnership. SmartMoney is a registered trademark. All Rights Reserved.
