Comments on: Frequent trading (short-term)in 401K or IRA, what is the rate of tax? http://www.shorttermtrading.org/short-term-trading/frequent-trading-short-termin-401k-or-ira-what-is-the-rate-of-tax Learn Short Term Trading Like the Pros Wed, 05 May 2010 02:49:31 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Dave http://www.shorttermtrading.org/short-term-trading/frequent-trading-short-termin-401k-or-ira-what-is-the-rate-of-tax/comment-page-1#comment-585 Dave Wed, 10 Mar 2010 09:17:59 +0000 http://www.shorttermtrading.org/short-term-trading/frequent-trading-short-termin-401k-or-ira-what-is-the-rate-of-tax#comment-585 Inside an IRA or a 401K, there are no tax consequences to trading stocks until a distribution is made (and then, its only on the distribution). So if you invest in individual stocks and hold them for the term of your account or if you buy and sell everyday, then there is no tax consequences. You pay income tax on both accounts when you take a distribution. If you were to hold a Roth IRA or Roth 401k, there would be no income tax consequences on distributions in most cases. So buy and sell to your heart's content but be aware that commissions are taking a chunk of your profits with every trade. Also that losses are difficult to make up in these accounts since you have limited ability to contribute to them. Also, many mutual funds charge a redemption fee which kicks in if you buy and sell within 6 months so beware of those fees as well.<br><b>References : </b><br> Inside an IRA or a 401K, there are no tax consequences to trading stocks until a distribution is made (and then, its only on the distribution). So if you invest in individual stocks and hold them for the term of your account or if you buy and sell everyday, then there is no tax consequences. You pay income tax on both accounts when you take a distribution.

If you were to hold a Roth IRA or Roth 401k, there would be no income tax consequences on distributions in most cases.

So buy and sell to your heart’s content but be aware that commissions are taking a chunk of your profits with every trade. Also that losses are difficult to make up in these accounts since you have limited ability to contribute to them.

Also, many mutual funds charge a redemption fee which kicks in if you buy and sell within 6 months so beware of those fees as well.
References :

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