Roth IRA 5 Year Rule
If you have had a Roth IRA for over 10 years but bought stock A 3 years ago and then sold stock A two years after owning it and bought stock B can you sell stock B after owning it for two years being 5 years tax free as long as you are over 59 ½.
Permalink Submitted by Alan - IRA critic on Mon, 2025-08-11 21:34
All sales of investments in an IRA have no tax consequences. You can buy and sell as often as you wish.
It is only distributions from the Roth IRA that must be reported and could have tax implications. But once you have held a Roth IRA for 5 years and are over 59.5, your Roth IRA is qualified and all distributions are tax and penalty free. You will get a 1099R from the Roth custodian to report all your distributions, but because your Roth is qualified, you only show the amount in Box 1 of that 1099R on line 4a of Form 1040. The taxable line is 4b and will be blank.
Permalink Submitted by Scott TI on Tue, 2025-08-12 11:54
Sorry I meant to add at the end, after selling the stocks I then took the money out of the IRA there would be no taxes correct.
Permalink Submitted by Alan - IRA critic on Tue, 2025-08-12 12:08
There would be no tax due if the distribution occurred after you were 59.5 and your first Roth contribution was over 5 years earlier. Your Roth would then be qualified.
If not qualified at the time of distribution, the distribution may or may not be taxable. You should have reported it on Form 8606. If the distribution was less than your Roth regular contribution total, it would still be tax and penalty free. Once your regular Roth contribution amount has been withdrawn, then your distributions come from conversions if you ever did conversions. These amounts would not be taxable, but if the conversion was done in the last 5 years, you would owe the 10% penalty. To report any non qualified distributions, you have to know the total of your contributions and conversions, which will be difficult if you did not keep track.
All this tracking goes away once your Roth is qualified, and distributions do not need to be reported on Form 8606.