How Can Investing Affect my Taxes?


How Can Investing Affect my Taxes?

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When you put money into your 401(k), those dollars are not included in your taxable income – therefore going in pre-tax.  When you put money into your IRA, assuming you are under the income thresholds, you can deduct those dollars from your income on your tax return. Putting money into your Roth 401(k) or your Roth IRA will not provide a tax benefit at the time of contribution, but when you withdraw funds from it, you won’t pay taxes on what you withdraw either.  If you withdraw money from your IRA or 401(k), you will pay income taxes on what you withdraw. If you do that and you are under 59 ½, you will also pay a 10% penalty at tax time on the amount you withdrew.

In a non-retirement account, like an Individual, Joint, or Trust account, when you sell investments in your account, you will either have a capital gain or a capital loss.

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TaxesErica Hartwick