Sorry guys if this seems like a dumb question, but I am trying to be more investor saavy.

In regard to IRA accounts held with brokerages like Ameritrade, eTrade or Harrisdirect and the like. Can those who have these accounts participate in short term trading? That is, holding stocks less than a year. If so, are the tax implications the same, since it is an IRA account?

For example, if I had any amount of money in an online IRA account, I could conceivably do short term day trading to increase my IRA account balance. But am I subject to the short term gains taxes the same as a regular traded account where I can withdraw the amount without penalty.

For some reason I have it in my head that since it's an IRA account, then I wouldn't be taxed. But that's the newbie me in.

Thanks in advance for your response.

Yes you may do it.
No you will not be charged tax (assuming you wait til retirement to withdraw money).

But excessive trading will cause the commissions and bid/offer spreads to eat away at your returns.

-Joe

For example, if I had any amount of money in an online IRA account, I could conceivably do short term day trading to increase my IRA account balance. But am I subject to the short term gains taxes the same as a regular traded account where I can withdraw the amount without penalty.

I have an IRA with TDWaterhouse, and I use it to trade stocks. HOWEVER, there is a rule that states that IRA accounts may not be used for day-trading, which means that if you open a position in the morning and close it before the end of the day, your account will be flagged as a day-trading account. Believe me, I know since I tripped this rule early on in my trading experiments. You can't open short position, but you may buy puts and calls. So, IRA accounts are better for swing-trading where a position may stay open for days or weeks.

On the tax side, you do not pay taxes on short-term or long-term gains in your IRA. OTOH, you don't get a tax deduction for your losses. You do get taxed at ordinary income rates when funds are withdrawn (assuming a rollover IRA from a 401K)

Good Luck,

g2w

>>>In regard to IRA accounts held with brokerages like Ameritrade, eTrade or Harrisdirect and the like. Can those who have these accounts participate in short term trading? That is, holding stocks less than a year.<<<

Yes.

>>>If so, are the tax implications the same, since it is an IRA account?<<<

Yes, if "the same" means gains are taxed the same as dividends, capital gains, etc. within the account.

>>>For example, if I had any amount of money in an online IRA account, I could conceivably do short term day trading to increase my IRA account balance. But am I subject to the short term gains taxes the same as a regular traded account where I can withdraw the amount without penalty?<<<

If it is a Roth IRA, you will never pay taxes on the gains. If it is a Traditional IRA, you will pay, when you eventually retire, taxes at the same rate as your ordinary income at that time. So it would make no difference whether your gains were from short or long term cap gains.

Nothing personal, but statistically speaking, you are more apt to decrease than increase your account balance by day trading.

Doug

I stand corrected regarding day trading in an IRA.

Doug

I stand corrected regarding day trading in an IRA.

Doug

But, you are absolutely correct when you advise against it on general prinicples.

I've done the best when I left day and swing trading behind and invested in good companies who have excellent growth prospects at a good price.

g2w

>>>I've done the best when I left day and swing trading behind and invested in good companies who have excellent growth prospects at a good price.<<<

I'd have done the best if I had never sold an option. It just took my winners and left me with the losers. But that's another board.

Doug

Thanks so much everyone.

You have answered my question as well as given sound advice.

H.

[In a TD Waterhouse IRA account, y]ou can't open short position, but you may buy puts and calls.

You can only buy puts and calls related to underlyings you own in a TD Waterhouse retirement account.