I have securities invested in my taxable brokerage account, and am preparing in advance to make a 2025 Roth IRA contribution. Since I would like to transfer money from my taxable brokerage account to my Roth IRA (as my 2025 contributiion), and essentially invest in the same security, then does that mean I have to sell those securities in my taxable brokerage account first > have it in cash position > transfer the money to my Roth IRA account > "re-purchase" that same security? Or is there an easier way to do it where I can essentially just sell the positions?
Also, another important queston: since the taxable brokerage and the Roth IRA account are both post-tax accounts, then will the above transaction (either having to sell the security and re-purchase it in my Roth IRA.... OR just having the "position" or ownership of the security moved from my taxable brokerage account to my Roth IRA) trigger taxes that need to be paid? They are both post-tax accounts right? sorry I'm having issues conceptualizing whether or not either (or both) events above would trigger taxes for the 2025 year
Thank you in advance!
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Since you can only contribute to your IRA with cash you will have to sell the securities in your brokerage account which will be a taxable event. Any transaction done within your retirement account is not a taxable event. Note that the wash sale rules apply so that if you sold an asset in your non retirement account at a loss you could not immediately buy the same asset in your IRA without it being considered a wash sale.
@Bsch4477 thank you! wait, sorry if I was unclear, but I was referring to the fact that I'm needing to sell the securities in my taxable brokerage in order to contribute to my Roth IRA. My understanding is that a taxable brokerage is not considered a "retirement" account...?
you are correct. your taxable brokerage account is not a retirement account. WARNING. if you sell securities at a loss in your taxable brokerage account and within 30 days before or after that sale purchase substantially identical securities in your retirement account the wash sale rules apply. the loss on the sale in the taxable account will not be allowed. also, the loss does not add to the tax basis of those securities in the retirement account.
@Mike9241 thank you! but if I do an in-kind transfer from my taxable brokerage to my Roth IRA without directly selling the securities, is this an event that triggers taxes?
an in-kind transfer should be treated as a sale in the taxable brokerage account. check with them
It’s a taxable event because otherwise the capital gains from a non retirement account would avoid taxation. If that were allowed everyone would do it.
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