Do You Pay Taxes on Roth IRA Capital Gains?

A Roth IRA is one of the most savvy moves an investor can make for long term investments without tax implications.  Today I’ll talk about taxation as it relates to capital gains for your Roth IRA.  

Capital Gain Taxes on Roth IRAS

Pay Taxes

The best part about a Roth IRA is that you won’t have to pay any taxes on capital gains earned or withdrawals later on.  This is due to the fact that you will pay money on whatever you contribute to the plan in exchange for the growth (without taxes) later on whenever you decide to withdraw it.  Whether your gains inside your Roth IRA are short or long term, does not matter.  Your money grows tax free, which makes this a popular investment.

Key Facts about Roth IRA Investing 

  • You will never pay short or long term capital gains taxes.
  • Your money is contributed with after-tax dollars.  That money can be withdrawn without penalty at any time.
  • Don’t withdraw your earnings prior to age 59.5, or you will be subject to paying income taxes plus a 10% penalty.

Roth IRAS Do Not Tax Gains – PERIOD

Gains earned inside your Roth IRA will never be taxed if you can follow along with some very basic rules. These rules apply to both short term holdings (less than a year) and long term holdings (over a year) which in any other investment vehicle would be taxed as ordinary income. (With longer term holds subject to long term capital gains tax.)

When are Roth IRAS Taxed?

You have already paid taxes on money contributed to your Roth IRA prior to funding it, so unless you need to withdraw earnings prior to age 59.5, that answer is NEVER! If you do find yourself pulling money out early, you will pay a 10% early withdrawal tax on earnings plus ordinary income tax.

What are the Best Investment Ideas for Your Roth IRA?

From my personal experience in enjoying the long-term tax benefits, I aim for the largest returns when investing with my Roth IRA.  You may as well swing for the fences and create a real income with your untaxed money rather than just going for lower yields.  Those are better off in taxable accounts.

Use your Roth IRA for investing in the stock market or emerging markets.  I add high-yielding dividend stocks as well because this creates cash flow that isn’t taxed.  You can also choose to re-invest your dividends and add even more value to your future returns.

Note: with my self-directed IRA, I chose to invest in a gold IRA (with Goldco Direct), property, equities, and cryptocurrency.  My Roth IRA holds equities, cash, and cryptocurrency, for full disclosure.

Every year, I contribute money to a Roth IRA via a traditional IRA conversion, which many people call a back-door Roth IRA.

Tim Schmidt


Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.