Naslov
A Comparison of Taxable Accounts and IRAs for Holding Equity Investments

Autori
Hulse, S. David

Izvornik
Journal of Taxation of Investments (0747-9115) 21 (2004), 2; 196-212

Vrsta, podvrsta i kategorija rada
Radovi u časopisima, članak, znanstveni

Ključne riječi
tax cut; dividends; capital gains; IRA; retirement accounts

Sažetak
One decision worth reconsidering is the form in which equity investments are held. Taxpayers could acquire equity investments in a tax-sheltered form by holding them in their individual retirement accounts (IRAs), or these investments could be acquired in a non-tax-sheltered form by purchasing them outside of an IRA (i.e., taxable account). This article considers mathematical models to evaluate this choice, taking into account the three types of IRAs that exist: Roth IRAs, deductible traditional IRAs, and nondeductible traditional IRAs. Break-even graphs are also presented to illustrate the mathematical models’ implications more explicitly. The results show that, even with a lower tax rate on dividends and capital gains, ownership of equities through a Roth IRA is still more advantageous than through a taxable account, and the same is often true for deductible traditional IRAs. However, the choice between a Roth IRA and deductible traditional IRA is less obvious. While qualified Roth IRA distributions are tax-free, they do not provide the initial tax savings that traditional IRA provides when deducting a contribution to it.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA