There are two ways to think about how to transfer stock to a Roth IRA, and the right one depends entirely on where the stock currently sits. If the shares are in a taxable brokerage account, you cannot move them in-kind: IRS rules require IRA contributions other than rollovers to be made in cash, so you have to sell the stock, contribute the proceeds, and (if you want) rebuy inside the Roth.1Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs) If the shares are already inside a traditional, SEP, or SIMPLE IRA, you can move the actual shares into a Roth through a conversion, no sale required.
Moving Stock From a Taxable Brokerage Account
Your brokerage will not let you push shares from a taxable account into a Roth IRA. The cash-only contribution rule exists so that any appreciation on the stock gets taxed before it enters a tax-free account. So the sequence is: sell the stock in the taxable account, wait for settlement, then contribute the cash to the Roth IRA within the annual contribution limit.
Under the SEC’s T+1 rule, in effect since May 2024, stock trades settle one business day after the trade date.2U.S. Securities and Exchange Commission. Shortening the Securities Transaction Settlement Cycle The proceeds aren’t available to contribute until the trade settles, so if you’re working up against a deadline, build in a buffer. The contribution has to reach the Roth by the tax-filing deadline for the year you want it to count toward, generally April 15 of the following year.3Internal Revenue Service. Retirement Topics – IRA Contribution Limits
Once the cash is in the Roth, you can buy back the same stock, buy something else, or leave it in cash. The full amount contributed becomes your basis inside the account, and future growth is tax-free.
What Selling the Stock Costs You in Tax
Selling to fund the Roth triggers a capital gain or loss in the year of the sale. The gain is your sale price minus your cost basis.4Internal Revenue Service. Topic No. 409, Capital Gains and Losses How it’s taxed depends on the holding period:
- Held more than one year: long-term capital gains rates of 0%, 15%, or 20%, depending on taxable income.
- Held one year or less: short-term, taxed at ordinary income rates.
If your modified adjusted gross income is above $200,000 single or $250,000 married filing jointly, the 3.8% Net Investment Income Tax stacks on top, pushing the top long-term rate to 23.8%.5Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax
If the stock has lost value, selling produces a capital loss you can use. Losses offset capital gains dollar-for-dollar, and up to $3,000 of excess loss can offset ordinary income each year, with the remainder carrying forward. You still contribute the cash proceeds to the Roth, so you get the loss deduction now and tax-free growth going forward.
Watch the Wash Sale Rule
This is where people funding a Roth from a losing stock position get hurt. If you sell a stock at a loss and buy the same stock, or something substantially identical, inside your Roth IRA within 30 days before or after the sale, the IRS calls it a wash sale and disallows the loss.6Internal Revenue Service. Publication 550, Investment Income and Expenses
In an ordinary wash sale between taxable accounts, the disallowed loss gets added to the basis of the replacement shares, so you recover it later. That doesn’t work when the replacement shares are in an IRA. Revenue Ruling 2008-5 confirmed the basis inside the IRA is not increased.7Internal Revenue Service. Revenue Ruling 2008-5 The loss is gone permanently.
To stay clear, either wait at least 31 days before repurchasing inside the Roth, or buy something that isn’t substantially identical.
Moving Stock That’s Already in a Traditional IRA
When the shares are already inside a traditional, SEP, or SIMPLE IRA, the rules change. You can convert to a Roth without selling. The IRS allows three mechanics: a 60-day rollover where you receive the assets and redeposit them, a trustee-to-trustee transfer between institutions, or a same-trustee transfer if both accounts are at one brokerage.8Internal Revenue Service. Retirement Plans FAQs Regarding IRAs
Publication 590-A requires that you roll over “the same property you received from the traditional IRA,” so the shares themselves move in-kind.9Internal Revenue Service. 2025 Publication 590-A The stock’s fair market value on the conversion date is added to your taxable income for that year as ordinary income, not capital gains, regardless of how long the shares were held.
A few features of the conversion route matter for planning:
- No income limit applies. Anyone can convert regardless of MAGI.
- No annual cap on the amount converted, though the full amount hits your taxable income that year.
- The 10% early-withdrawal penalty does not apply to the conversion itself.10Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
- Each conversion starts its own five-year holding period. Pulling converted amounts out before five years and before age 59½ can trigger a 10% penalty on the converted amount.
A large conversion can push you into a higher bracket, and depressed share prices are a common reason people accelerate one, since the tax bill tracks the value on the conversion date. Spreading conversions across multiple years is a common way to smooth the tax hit.
Contribution Limits and Income Rules That Cap the Cash Route
The sell-and-contribute path is bounded by the annual IRA contribution limit. For 2026, that limit is $7,500 if you’re under 50 and $8,600 if you’re 50 or older, across all traditional and Roth IRAs combined.3Internal Revenue Service. Retirement Topics – IRA Contribution Limits You also need earned income at least equal to the contribution. Wages, salaries, tips, bonuses, commissions, and net self-employment income qualify; dividends, capital gains, and rental income do not.11Internal Revenue Service. Topic No. 451, Individual Retirement Arrangements (IRAs)
Direct Roth contributions phase out at higher incomes. For 2026:12Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
- Single and head of household: full contribution below $153,000 MAGI, partial to $168,000, none at or above.
- Married filing jointly: full contribution below $242,000 MAGI, partial to $252,000, none at or above.
- Married filing separately: phase-out runs $0 to $10,000, which shuts most filers out.13Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted
Backdoor Roth When Income Is Too High
If your income disqualifies you from contributing directly, you can make a nondeductible traditional IRA contribution and then convert it to a Roth. The conversion is reported on Form 8606.14Internal Revenue Service. About Form 8606, Nondeductible IRAs
The catch is the pro-rata rule. The IRS treats all your traditional, SEP, and SIMPLE IRA balances as a single pool when figuring the taxable share of a conversion. You cannot isolate the after-tax dollars. If you hold $93,000 of pre-tax traditional IRA money and add a $7,500 nondeductible contribution, roughly 92.5% of anything you convert is taxable, which erodes most of the strategy’s appeal.
Reporting the Moves
Selling the stock in the taxable account produces a Form 1099-B from your broker. The gain or loss goes on Form 8949 and Schedule D with your Form 1040.15Internal Revenue Service. About Schedule D (Form 1040), Capital Gains and Losses The Roth IRA contribution is reported by your custodian on Form 5498; you don’t file it, but check the amounts match.16Internal Revenue Service. Form 5498, IRA Contribution Information A Roth conversion also appears on Form 5498 (Box 3) and must be reported on Form 8606 with your return.14Internal Revenue Service. About Form 8606, Nondeductible IRAs