Can You Invest Your Roth IRA in Stocks? Limits, MLPs, Wash Sales

Yes, you can invest your Roth IRA in stocks, and equities are among the most common holdings people put inside these accounts. A Roth IRA is a tax-advantaged container; you choose what goes inside, whether that’s individual company shares, ETFs, mutual funds, REITs, or preferred stock. Federal tax law does not restrict Roth IRAs to a short menu of approved securities. Instead, it names a small list of things you cannot hold and permits almost everything else.¹

The appeal of holding stocks this way is the tax treatment. In a regular brokerage account, dividends and realized gains are taxed each year. Inside a Roth IRA, those same dividends and gains grow with no current tax, and once you take a qualified distribution, the entire withdrawal, including all investment earnings, comes out free of federal income tax.² A Roth IRA also has no required minimum distributions during your lifetime, so a stock position can keep compounding indefinitely without a forced sale at a particular age.³

Which Stock Investments Qualify

For stock investors, the standard options all sit inside what a Roth IRA is allowed to hold:

Common stocks, the basic ownership shares of publicly traded companies.
Preferred stocks, which pay a fixed dividend and rank ahead of common stock on company assets but usually carry no voting rights.
Exchange-traded funds, which track an index, sector, or strategy and trade on an exchange like a share.
Mutual funds, pooled funds that hold a diversified basket of stocks and are priced once per day.
Real estate investment trusts, companies that own or finance income-producing real estate and must distribute at least 90 percent of taxable income to shareholders each year.⁴

Your custodian may layer on its own limits. Some brokerages don’t offer certain over-the-counter stocks or foreign exchanges. Those are business decisions by the firm, not federal rules.¹

Master Limited Partnerships Can Trigger a Tax Bill

Master limited partnerships trade on stock exchanges and look like ordinary stocks, but they’re structured as partnerships that pass income directly to investors. When an MLP generates income from active business operations inside a Roth IRA, that income can be classified as unrelated business taxable income.⁵ The Roth IRA is normally tax-exempt, but UBTI above a $1,000 annual deduction triggers a tax the IRA itself has to pay.⁶ A small MLP position may stay under the threshold; a large one can produce a surprise bill on an account you thought was tax-free.

The Wash-Sale Trap Between Accounts

If you sell a stock at a loss in a taxable brokerage account and buy the same stock (or something substantially identical) in your Roth IRA within 30 days before or after the sale, the IRS disallows the loss. Normally a disallowed wash-sale loss gets added to the cost basis of the replacement shares. When the repurchase happens inside a Roth IRA, that basis adjustment is lost, so the deduction disappears with no way to recover it.⁷

What a Roth IRA Cannot Hold

Federal law lists a small set of prohibited investments. If your Roth IRA buys one, the amount spent is treated as a distribution, which can mean income tax on earnings and a 10 percent early-withdrawal penalty.¹

Collectibles, including artwork, rugs, antiques, gems, stamps, coins, alcoholic beverages, and most precious metals. A narrow exception covers certain government-minted coins (such as American Gold Eagles) and bullion meeting specific fineness standards, but only if a qualified trustee holds the physical metal.⁸
Life insurance contracts. The statute explicitly bars IRA funds from being invested in them.
S corporation stock. An S corporation can only have certain shareholders (individuals, estates, and specific trusts), and a Roth IRA doesn’t qualify. If it bought shares, the company could lose its S status.⁹

How Much You Can Put In

For the 2026 tax year, the annual Roth IRA contribution limit is $7,500 if you are under 50, and $8,600 if you are 50 or older, with the extra $1,100 counted as a catch-up contribution.¹⁰ You generally have until April 15, 2027 to make contributions for 2026.

Eligibility depends on your modified adjusted gross income. Once your income enters the phase-out range, your allowable contribution shrinks, and above the upper end you cannot contribute directly.

Single or head of household: full contribution below $153,000 MAGI, reduced between $153,000 and $168,000, none at $168,000 or above.
Married filing jointly: full contribution below $242,000, reduced between $242,000 and $252,000, none at $252,000 or above.
Married filing separately: the phase-out runs from $0 to $10,000, so most people in this filing status face reduced or no eligibility.¹⁰

Contributing more than you’re allowed triggers a 6 percent excise tax on the excess for every year it stays in the account.¹¹ You can avoid the penalty by pulling the excess (plus any earnings on it) before your tax-filing deadline for the year.

When You Can Take the Money Out

You can withdraw your contributions, meaning the money you put in rather than any investment gains, at any time and for any reason, with no tax and no penalty. The IRS treats Roth withdrawals as coming from contributions first, then conversions, and earnings last.¹²

Earnings are the piece that carries strings. To pull earnings out tax-free and penalty-free, both conditions must be met:

You are at least 59½, or the distribution qualifies because of death, disability, or a first-time home purchase of up to $10,000.
At least five tax years have passed since you first contributed to any Roth IRA. The clock starts on January 1 of the year of your first contribution, not the day the money hit the account.²

If you withdraw earnings before meeting both conditions, you generally owe income tax on those earnings plus a 10 percent early-distribution penalty. Several situations waive the penalty (though not necessarily the income tax), including unreimbursed medical expenses above 7.5 percent of adjusted gross income, qualified higher education costs, health insurance premiums while unemployed, and birth or adoption expenses up to $5,000 per child.¹³

A Note on Prohibited Transactions

Beyond the list of banned investment types, federal law also prohibits certain dealings between a Roth IRA and people closely connected to it, called disqualified persons: you, your spouse, your parents, your children and their spouses, and any fiduciary of the account.¹⁴ Buying property from a disqualified person, lending IRA money to one, or using IRA assets personally can cause the IRS to treat the whole account as distributed on the first day of the year the violation happened.¹⁵ For someone buying publicly traded stocks through a mainstream brokerage, this rarely comes up. It’s mainly a concern in self-directed IRAs where the account holder handles individual transactions directly.

1
Internal Revenue Service. Retirement Plans FAQs Regarding IRAs
2
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
3
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
4
SEC.gov. Investor Bulletin – Real Estate Investment Trusts (REITs)
5
Office of the Law Revision Counsel. 26 USC 511 – Imposition of Tax on Unrelated Business Income
6
Office of the Law Revision Counsel. 26 USC 512 – Unrelated Business Taxable Income
7
IRS.gov. Revenue Ruling 2008-5 – Loss From Wash Sales of Stock or Securities
8
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
9
Office of the Law Revision Counsel. 26 USC 1361 – S Corporation Defined
10
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
11
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
12
Internal Revenue Service. Topic No. 451 – Individual Retirement Arrangements (IRAs)
13
Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
14
Internal Revenue Service. Retirement Topics – Prohibited Transactions
15
Office of the Law Revision Counsel. 26 USC 4975 – Tax on Prohibited Transactions