How to Transfer Stock to a Roth IRA: Sources, Limits, and Tax Traps

To transfer stock into a Roth IRA, the stock has to already be inside another IRA. If your shares sit in a traditional, SEP, or SIMPLE IRA, you can move them in-kind through a Roth conversion without selling. If they sit in a taxable brokerage account, you cannot transfer them directly: IRS rules require every IRA contribution other than a rollover to be made in cash, so you have to sell the shares, contribute the proceeds, and (if you want) repurchase inside the Roth.¹

Which route applies to you is a question of where the stock lives right now. The tax bill looks very different in each case.

Moving Stock From a Taxable Brokerage Account

The custodian will not accept shares from your taxable account as a contribution. You have to sell the position in the brokerage account, wait for the trade to settle, then send cash to the Roth IRA within the annual contribution limit. The contribution must reach the account by the tax-filing deadline for the year you want it credited to, generally April 15 of the following year.²

Stock trades now settle one business day after the trade date under the SEC’s T+1 rule that took effect in May 2024.³ Sales made right up against April 15 can miss the window. Build in a couple of business days.

Once the cash arrives, you can reinvest inside the Roth in whatever the custodian offers, including the same ticker you just sold. Anything the account earns from that point forward grows tax-free.

The Tax Cost of Selling First

Selling the stock triggers a capital gain or loss in the year of sale. The gain is the difference between your sale price and your cost basis.⁴ The rate turns on how long you held the shares:

Held more than one year: long-term capital gains rates of 0%, 15%, or 20%, depending on taxable income.⁴
Held one year or less: short-term, taxed at your ordinary income rate.

Higher earners also owe the 3.8% Net Investment Income Tax on capital gains once modified adjusted gross income tops $200,000 (single) or $250,000 (married filing jointly).⁵ Stacked on the top long-term rate, the effective bite reaches 23.8%.

Selling a stock that has dropped works the other direction. The realized loss offsets other capital gains, and up to $3,000 of any leftover loss offsets ordinary income each year, with unused losses carrying forward.⁴ You still contribute the sale proceeds as cash.

Watch the Wash Sale Rule

This is the trap that catches people who sell at a loss and then repurchase inside the Roth. If you buy the same stock, or something substantially identical, within 30 days before or after the sale, the IRS treats it as a wash sale and disallows the loss.⁶

Normally a disallowed wash-sale loss gets added to the basis of the replacement shares, so you recover it later. When the replacement shares are in an IRA, that recovery does not happen. Revenue Ruling 2008-5 confirmed the taxpayer’s basis in the IRA is not increased by the disallowed loss.⁷ The loss is gone for good.

To keep the loss, wait at least 31 days before buying the same stock in the Roth, or put the cash into a different investment. The “substantially identical” test is fact-specific, so a fund tracking the exact same index as one you just sold is risky; a different index or a different sector generally is not.

Moving Stock From a Traditional, SEP, or SIMPLE IRA

When the shares already sit in a pre-tax IRA, the rules change. You can convert those shares to a Roth IRA in-kind, 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.⁸

Publication 590-A requires that you roll over “the same property you received from the traditional IRA,” which is what allows the shares themselves to move.⁹ The stock’s fair market value on the conversion date is added to your taxable income for the year, and taxed at ordinary income rates, not capital gains rates, regardless of how long you held it.

A few features of Roth conversions matter when you’re planning one:

No income limit applies. Anyone can convert regardless of MAGI.
No dollar cap applies. You can convert any amount in a single year, though the full converted value hits your taxable income for that year.
The 10% early-distribution penalty does not apply to the conversion itself.¹⁰
Each conversion carries its own five-year holding period. Pulling converted amounts out before five years and before age 59½ can trigger the 10% penalty on the converted amount.

A single-year conversion of a large position can push you into a higher bracket. Spreading conversions across multiple tax years keeps the marginal rate lower.

How Much You Can Contribute in 2026

The sell-and-contribute route is capped by the annual IRA contribution limit. For 2026, the limit is $7,500 for individuals under age 50 and $8,600 for those 50 and older.² That total covers your traditional and Roth IRA contributions combined, not each account separately.

You also need earned income at least equal to what you contribute. Wages, salaries, commissions, tips, bonuses, and net self-employment income count. Dividends, capital gains, and rental income do not.¹¹

Income Phase-Outs

Direct Roth IRA contributions phase out at higher incomes. For 2026:¹²

Single and head of household: full contribution below $153,000 MAGI, partial from $153,000 to $168,000, none at $168,000 or above.
Married filing jointly: full contribution below $242,000, partial from $242,000 to $252,000, none at $252,000 or above.
Married filing separately: the phase-out runs from $0 to $10,000, which effectively closes the direct route for most people in this status.¹³

The Backdoor Route If You’re Over the Limit

If your income shuts you out of direct contributions, you can still get cash into a Roth by making a nondeductible contribution to a traditional IRA (no income limit applies to contributions there) and then converting that traditional IRA to a Roth. The conversion is reported on Form 8606.¹⁴

The pro-rata rule complicates this if you already hold other pre-tax IRA balances. The IRS treats all of your traditional, SEP, and SIMPLE IRA balances as a single pool when calculating what portion of any conversion is taxable, so you cannot pick out only the after-tax dollars. Someone with $93,000 in pre-tax traditional IRA money who makes a $7,500 nondeductible contribution will find that roughly 92.5% of any converted amount is taxable, not just the after-tax slice they meant to move.

If You Contribute Too Much

Going over the annual limit, or contributing when your income exceeds the phase-out, creates an excess contribution. The IRS charges a 6% excise tax on the excess for every year it stays in the account.²

You can fix it two ways before your tax-filing deadline (including extensions, which typically pushes the date to October 15). Withdraw the excess plus any earnings it generated; those earnings are taxable in the year the contribution was made. Or recharacterize the contribution, redesignating it as a traditional IRA contribution instead. Either correction is reported on Form 8606.

1
Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs)
2
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
3
U.S. Securities and Exchange Commission. Shortening the Securities Transaction Settlement Cycle
4
Internal Revenue Service. Topic No. 409, Capital Gains and Losses
5
Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax
6
Internal Revenue Service. Publication 550, Investment Income and Expenses
7
Internal Revenue Service. Revenue Ruling 2008-5
8
Internal Revenue Service. Retirement Plans FAQs Regarding IRAs
9
Internal Revenue Service. 2025 Publication 590-A
10
Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
11
Internal Revenue Service. Topic No. 451, Individual Retirement Arrangements (IRAs)
12
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500
13
Internal Revenue Service. 2026 Amounts Relating to Retirement Plans and IRAs, as Adjusted
14
Internal Revenue Service. About Form 8606, Nondeductible IRAs