Query: Short Term Capital Gains tax vs. IRA Withdrawal Tax w/o Quarterly Est. Taxes

Relevant passages:
 <=SEP=> "There is not a special rate for short-term capital gains.  Only long-term gains have a special rate.  Short-term gains are taxed at your ordinary-income rate (see here).  Hence if you're in the 25% bracket, your short-term gain would be taxed at 25%.  The IRA withdrawal, as you already mentioned, would be taxed at 25%, plus a 10% penalty, for 35% total.  Thus the bite on the IRA withdrawal is larger than that on a non-IRA withdrawal. As for the estimated tax issue, I don't think there will be a significant difference there.  The reason is that (traditional) IRA withdrawals count as ordinary taxable income (see here).  This means that, when you withdraw the funds from your IRA, you will increase your income.  If that increase pushes you too far beyond what your withholding is accounting for, then you owe estimated tax.  In other words, whether you get the money by selling stocks in a taxable account or by withdrawing them from an IRA, you still increase your taxable income, and thus potentially expose yourself to the estimated tax obligation. (In fact, there may be a difference.  As you note, you will pay tax at the capital gains rate on gains from selling in a taxable account.  But if you sell the stocks inside the IRA and withdraw, that is ordinary income.  However, since ordinary income is taxed at a higher rate than long-term capital gains, you will potentially pay more tax on the IRA withdrawal, since it will be taxed at the higher rate, if your gains are long-term rather than short term.  This is doubly true if you withdraw early, incurring the extra 10% penalty.  See this question for some more discussion of this issue.) In addition, I think you may be somewhat misunderstanding the nature of estimated tax.  The IRS will not ""ask"" you for a quarterly estimated tax when you sell stock.  The IRS does not monitor your activity and send you a bill each quarter.  They may indeed check whether your reported income jibes with info they received from your bank, etc., but they'll still do that regardless of whether you got that income by selling in a taxable account or withdrawing money from an IRA, because both of those increase your taxable income. Quarterly estimated tax is not an extra tax; it is just you paying your normal income tax over the course of the year instead of all at once.  If your withholdings will not cover enough of your tax liability, you must figure that out yourself and pay the estimated tax (see here); if you don't do so, you may be assessed a penalty.  It doesn't matter how you got the money; if your taxable income is too high relative to your withheld tax, then you have to pay the estimated tax.  Typically tax will be withheld from your IRA distribution, but if it's not withheld, you'll still owe it as estimated tax."

 <=SEP=> "Bottom line is this: there's no ""short term capital gains tax"" in the US. There's only long term capital gains tax, which is lower than the regular (aka ordinary) tax rates. Short term capital gains are taxed using the ordinary tax rates, depending on your bracket. So if you're in the 25% bracket - your short term gains are taxed at 25%. You're describing two options: For the case #1 you'll pay 25% tax (your marginal rate) + 10% penalty (flat rate), total 35%. For the case #2 you'll pay 25% tax (your marginal rate) + 0% penalty. Total 25%. Thus, by withdrawing from IRA you'll be 10% worse than by realizing capital gains. In addition, if you need $10K - taking it from IRA will make the whole amount taxable. While realizing capital gains from a taxable account will make only the gains taxable, the original investment amount is yours and had been taxed before. So not only there's a 10% difference in the tax rate, there's also a significant difference in the amount being taxed. Thus, withdrawing from IRA is generally not a good idea, and you will never be better off with withdrawing from IRA than with cashing out taxable investments (from tax perspective). That's by design."