Since the deposits on a simple traditional IRA are never taxed, how are qualified dividends and long term gains from a simple traditional ira taxed if withdrawn?

[furfaromj]

Age 66. Investments earning long term capital gains and qualified dividends. These are automatically reinvested in the fund(s). Since no money in those funds was ever taxed, are these earnings taxed like regular income if withdrawn?

[Lisa995]

What happens in an IRA stays in an IRA until you take a distribution from the IRA account, when the money is distributed from the IRA its taxed as ordinary income.

[furfaromj]

Thanks. That's what I thought but couldn't find a similar question or answer anywhere else!

[VolvoGirl · Accepted solution]

That is one of the benefits of a deductible Traditional IRA.  You get a deduction now for it and it grows tax deferred.  You don't report buys, sell, interest, dividends or any transactions.  So you can do a lot of stock trading and moving funds around inside the IRA.  

You only report Distributions and rollovers and conversions.  You will get a 1099R for those.  You only pay tax on what you take out or convert to a ROTH IRA.  But then it's taxed as ordinary income and not capital gains.  

See IRS Pub 590a IRA Contributions  https://www.irs.gov/pub/irs-pdf/p590a.pdf 

590b Distributions https://www.irs.gov/pub/irs-pdf/p590b.pdf