Paying state taxes for IRA distributions

[jspitzle]

My IRA has incurred capital gains from several states for many years.  Now that I've started to take distributions from the IRA, how do I allocate and pay the various states capital gains that have accumulated over many years?

[fanfare]

You don't have to worry about this.

IRA is tax-deferred.

That means you don't pay capital gains taxes.

[VolvoGirl]

IRA withdrawals are taxed at ordinary  income tax rates.    You don't report or track any transactions, buys, sells, dividends, interest, capital gains etc.  Everything is tax deferred.  That's one of the benefits of using an IRA or 401K.  Except that when you take a distribution it all comes out taxable at your current rate or may push you into a higher tax bracket.  

When IRAs first started it was assumed that people would have lower income and  be in a lower tax rate when they started taking distributions in retirement.  But it doesn't always work out that way.

[jspitzle]

Taxes need to be paid for IRA distributions

[VolvoGirl]

Yes?  Right you need to pay federal and state taxes on it.  Unless it was in a ROTH IRA.  

[jspitzle]

For IRA distributions, do I need to pay state taxes to each state that had capital gains over time? If yes, how do I allocate?  thanks

[DoninGA · Accepted solution]

---

@jspitzle wrote:

For IRA distributions, do I need to pay state taxes to each state that had capital gains over time? If yes, how do I allocate?  thanks

---

No you do not.  You may have federal taxes withheld from the distribution and you can have state income taxes withheld from the distribution.  The state taxes withheld will only be for your state of residence and you have to tell the IRA plan administrator that you want to have state taxes withheld and the percentage amount.

[jspitzle]

Thank You!