Tax Liability

[ckw-jw51]

We have money with a financial advisor, one account that has stock & exchange-traded funds, we have an account that is our money market account, and we have our IRA’s.

We are thinking about using the money from our Money Market account to pay our annual bills as our financial advisor felt that using this account was the best place to pull from as this money has already been taxed.

Using the money from our money market account will this increase our tax liability?

I have been told our principal is not taxed again and only the interest made on the money market or gains/dividends etc. on the investments are taxed if we sell something.

Thanks, 

ckw-jw51

[KrisD15]

That is true, withdrawals would not be taxable income since you were already taxed on the money before you put it into the money market account. 

Yes, earning on the investment is taxed. 

[ckw-jw51]

Sorry, please help me to understand.  If we need say $ 500.00 to purchase a new washer.  We tell the financial advisor this.  He in turn sells funds in order to get us the money.  Is the money we receive from this sell taxable?  I am trying my best to understand. 

Thanks

ckw-jw51

[BrittanyS]

The money would not be taxable as long as the money withdrawn is the money you contributed and not part of the interest.  For example, you invested 500 in the account and over the year you earned $25 in interest for a total in the account of $525.  If you withdrawal $500 for a washer then the funds are not taxable because it was part of the funds you contributed.  The only amount that is taxable is the $25 from the interest.

@ckw-jw51