You cannot transfer stock from a brokerage to an IRA in kind. Federal law requires every IRA contribution to be made in cash, so the only route is to sell the shares in your taxable account, pay any tax the sale triggers, and then deposit the cash into your IRA up to the annual contribution limit. For 2026, that limit is $7,500, or $8,600 if you’re 50 or older.
Why In-Kind Transfers Aren’t Allowed
Under 26 U.S.C. § 408(a)(1), an IRA trustee or custodian cannot accept any contribution unless it is in cash. The only statutory exception is a rollover from another retirement account.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts If you instructed your brokerage to move shares from your taxable account into your IRA, the request would be rejected.
“Cash” in practice means a check, wire, or electronic transfer from a bank or brokerage settlement account. Stocks, bonds, and mutual fund shares are property, not cash, and property cannot be contributed.
Rollovers work differently. When money moves between two existing retirement accounts, the statute allows “money and any other property” to move, so shares can travel intact from one IRA to another.2Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts That flexibility does not reach new contributions coming from a taxable account.
How to Sell and Contribute the Proceeds
The mechanics are simple. Sell the stock in your brokerage account, wait for the trade to settle (typically one business day under the standard T+1 schedule), and transfer the cash to your IRA. Most brokerages let you do this from the same app or website, and the full sequence usually takes a few days.
When you make the contribution, your custodian will ask which tax year it applies to. Contributions for the prior year can be made up to the federal filing deadline, so a contribution made by April 15, 2026, can count toward the 2025 limit. Pick the right year at the point of contribution; correcting it later means paperwork you can avoid.
What the Sale Will Cost You in Tax
Selling to fund an IRA is a taxable event even if every dollar goes straight into the retirement account. What you owe depends on your holding period and your income.
Long-Term vs. Short-Term Gains
Stock held more than one year qualifies for long-term capital gains rates of 0%, 15%, or 20%, depending on taxable income.3Internal Revenue Service. Topic No. 409, Capital Gains and Losses For 2026, a single filer pays 0% on long-term gains while taxable income stays under $49,450, and the 20% rate begins above $545,500. For joint filers, the 0% bracket runs up to $98,900 and the 20% bracket begins above $613,700.
Stock held one year or less is taxed at your ordinary income rate, which can reach 37%. If your one-year mark is close, waiting a few weeks before selling can shift the sale into long-term territory and cut the tax bill sharply.
Higher earners also owe a 3.8% net investment income tax on capital gains once modified adjusted gross income exceeds $200,000 (single) or $250,000 (joint), which pushes the top effective long-term rate to 23.8%.4Internal Revenue Service. Net Investment Income Tax
If the Stock Is Down
Selling at a loss has a benefit. Capital losses first offset any capital gains for the year. If losses exceed gains, you can deduct up to $3,000 of the remainder against ordinary income ($1,500 if married filing separately) and carry the rest forward.3Internal Revenue Service. Topic No. 409, Capital Gains and Losses But if you then buy the same stock back inside your IRA, you can lose that deduction entirely. That’s the next problem to plan around.
The Wash Sale Problem With IRAs
Under 26 U.S.C. § 1091, selling a security at a loss and acquiring a “substantially identical” security within 30 days before or after the sale disallows the loss.5Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities In a normal wash sale between two taxable accounts, the disallowed loss is added to the basis of the replacement shares, so you recover it when you eventually sell them.
IRS Revenue Ruling 2008-5 confirmed that when the replacement is bought inside an IRA, the disallowed loss is gone permanently. Your IRA’s basis does not increase.6Internal Revenue Service. Revenue Ruling 2008-5 – Loss From Wash Sales of Stock or Securities So if you sell a losing stock in your taxable account and then use your IRA contribution to buy the same stock, the loss vanishes. Either wait at least 31 days before repurchasing inside the IRA, or buy something that isn’t substantially identical.
How Much You Can Actually Contribute
Even if the sale frees up $50,000, only a slice of it can go into an IRA in a given year. For 2026, the annual limit is $7,500 for individuals under 50, with an additional $1,100 catch-up bringing the total to $8,600 at age 50 or older.7Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 The limit applies across all your traditional and Roth IRAs combined, not per account.
You also need taxable earned income for the year at least equal to what you contribute. Investment income doesn’t count. If you earned $5,000, that caps the contribution regardless of the statutory maximum.8Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs)
Watch the Excess Contribution Penalty
Contributing more than your annual limit triggers a 6% excise tax on the excess for every year it remains in the account, and the tax compounds.9Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities If you overcontribute, withdraw the excess plus any earnings on it by the due date of your return, including extensions, to avoid the penalty.10Internal Revenue Service. IRA Year-End Reminders
This is easy to trip on when you’re moving stock proceeds. You might sell $10,000 of stock, owe $1,500 in tax on the gain, and then contribute the whole $10,000 instead of the $7,500 ceiling. Track the numbers as you go.
Don’t Sell Your Stock Directly to Your IRA
Selling property from yourself to your own IRA is a prohibited transaction.11Internal Revenue Service. Retirement Topics – Prohibited Transactions The consequence is severe: the IRA loses its tax-advantaged status, and the IRS treats the entire balance as distributed to you on the first day of the year the violation occurred. That means income tax on the full balance, and a possible 10% early withdrawal penalty if you’re under 59½. The legal path is to sell the shares on the open market, receive cash, and then contribute cash as a new contribution.
The Tax Forms This Generates
The sale and the contribution each produce their own paperwork. Your brokerage will issue Form 1099-B for the stock sale, showing proceeds and cost basis, which you report on Schedule D.12Internal Revenue Service. About Form 1099-B, Proceeds From Broker and Barter Exchange Transactions
Your IRA custodian will file Form 5498 reporting the contribution amount and the tax year.13Internal Revenue Service. About Form 5498, IRA Contribution Information If any part of your traditional IRA contribution is nondeductible, file Form 8606 with your return to track your after-tax basis.14Internal Revenue Service. About Form 8606, Nondeductible IRAs Skipping Form 8606 can lead to paying tax twice on the same money when you eventually take distributions.