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Gains or losses within a tax deferred retirement account, such as an IRA, are not reported on a tax return.
No. You do not report sales, interest, dividends,gains, losses or any transactions inside the IRA or 401K accounts. You only report distributions, Rollovers, Transfers, conversions that you get a 1099R for. That's one of the benefits of using an IRA or 401K Account. It grows tax deferred. Then when you take it out you pay ordinary income tax on it. But you don't get the lower capital gains tax on it.
If you have a loss in the IRA you will just have less income to take out of it, so less tax to pay.
@postnurse in a way, you get the benefit of "tax deductibiltiy" (and I use that expression loosely).... since the money went into the IRA on a tax -deferred basis, the IRS didn't take any tax money from you. Now that the value of the investments from the IRA went down. the IRS will effectivley 'absolve' you of that tax
Let's say I put $10,000 into my IRA over time and if I hadn't done that the tax would have been 20% or $2,000.
I sell my investment in the IRA and it is only worth $6,000. I distribute the money and the IRA is only going to ask me for $1200, which is stll the 20%. I never have to pay the $800 difference. So in that way. there is a benefit of 'tax deductibility' on losses within an IRA.
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