I own funds with us treasury security holdings. Should they only be in taxable accounts ?

[djrich49]

I have them in my IRA and am old enough to have RMDs

[Mike9241]

That's a financial question not a tax question. when you take the RMD none is exempt because you invested in US Treasuries in the tax exempt account.  

[djrich49]

Thank you.  I mentioned RMD to clarify that at my age there is no penalty for what I move from my IRA to my taxable account,  My question is - Is there a tax advantage for the Dividends I get from a fund that invests in treasuries, that I am missing because I have those funds in my IRA.  

[NCperson · Accepted solution]

@djrich49 there is a small difference.

if the funds are in a taxable account, the interest is counted as 'ordinary income'.

Similarly, the interst that accues in the IRA will also be counted as 'ordinary income' upon distribution.

Both are taxes the same way - so there is no difference in  the impact at the federal level. 

The difference would be related to state taxes.

those government obligations are not taxed at the state level.  

so you are marginally better off to have the US government obligations in a taxable account. 

In a taxable account, there are no state income taxes on the interest.

in an IRA, when the income is eventually distributed, it will be taxed by the state as a dsitribution.

So you are better off putting US interest oblications in a taxable account because the state income tax treatment is different. 

if you live in a state that doesn't have an income tax, where you have the investment doesn't matter as the tax implications are the same.