Q&A: Can I Fund My Roth IRA with Appreciated Stock?

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I have a large stock position with unrealized gains. Can I use the appreciated stock to fund my Roth IRA?

I like the way you think!

Sadly, the IRS is very clear about this; contributions must be cash.

IRS Publication 590-A says the following:

  • “Contributions, except for rollover contributions, must be in cash.”
  • “Contributions must be in the form of money (cash, check, or money order).”

As we wrote in “How to Convert Taxable Savings Into Your Roth IRA,” you don’t need to reduce your standard of living to fund your Roth IRA. Instead you can “convert” your taxable savings by deferring to your Roth 401(k), contributing to your Roth IRA, and then supplementing your lifestyle from your savings.

We also recommend as a part of our Capital Gains Management that when giving to family or charity you give appreciated stock instead of realizing the gains so you give cash.

It makes sense that you’d want to combine these strategies and fund your Roth with appreciated stock. But that is not allowed.

Even if you have to realize gains to fund your Roth IRA (or supplement your lifestyle), funding your Roth is likely still a good idea. Although each person’s situation requires extensive analysis to determine what the best plan is for them, in general tax planning favors funding your Roth.

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Chief Operating Officer, CFP®, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 800 financial articles and is known for her expertise on tax planning.