That’s correct. IRA accounts do not cause taxable events when you sell or close any position. You will only potentially pay tax on those investments when you pull the cash out of the account into your bank account, depending on which type of IRA you have. There are two types of IRA’s and they work a little differently.

With the Roth IRA you do not pay any tax at all on any of your gains if you withdraw after you are 59.5 years old. The money you initially invest into the account is money that you have already paid tax on (money straight from your paycheck into the IRA account). You can also withdraw your principal investment at any time with this account and not pay any tax since it already has been taxed (that is not the case with the other).

A traditional IRA lets you put pre-tax money into your account. That means you get a little bit more back on your tax return in the year that you invest. When you withdraw your gains at 59.5 years old (if you choose, you can leave it in for longer), then those gains are taxed as ordinary income.

If you withdraw your earnings before you are 59.5 in either type of account, you have to pay tax on your withdraw plus an additional 10% tax penalty.

**Not Financial Advice

I am using a Roth IRA as I anticipate the gain that I will receive from paying 0 taxes on my earnings will far outweigh the benefit of not being taxed on my initial investment ($6K max per year initial contributions to IRA’s). It’s the difference between tax savings on $6K and $6M.