The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: frugalnacho on January 23, 2015, 11:37:48 AM
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Can I reclassify purchases from taxable to IRA? Say I purchased $5500 worth of VTSAX in a taxable account in 2015, and it has increased to $6000. Can I reclassify that purchase into my IRA, effectively contributing $6k to my IRA?
If I have money in a plain old taxable account at Vanguard, can I convert it into my IRA without having to sell and rebuy? If the funds are held for less than a year would this trigger a short term capital gains tax?
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No. Only cash can go into IRAs.
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No. Only cash can go into IRAs.
This couldn't be more wrong.
OP, I'd call Vanguard, but my initial reaction is, no, you have to sell and rebuy within the IRA.
And yes, there would be ST Cap Gain tax triggered.
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Can I reclassify from a tIRA to a roth or vice versa? Or if I pick one and make a contribution early in the year is that a permanent unchangeable contribution? Like if I funded a roth for $5500 today, then realized later on that I fucked up and should have done a tIRA instead of roth am I just fucked?
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No. Only cash can go into IRAs.
This couldn't be more wrong.
What? I don't know of any way to transfer non-cash assets to an IRA. Once the cash is in there you can buy whatever you want (even houses if you pick the right custodian), but you can't just directly move stock you already own into the account.
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No. Only cash can go into IRAs.
This couldn't be more wrong.
What? I don't know of any way to transfer non-cash assets to an IRA. Once the cash is in there you can buy whatever you want (even houses if you pick the right custodian), but you can't just directly move stock you already own into the account.
I was perhaps reading it wrong. I was reading it as "you can only hold cash in an IRA."
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Another follow up question:
Can I sell $5500 worth out of a taxable account in 2015 (and I had held them greater than one year), and then use that money to fund my 2014 IRA, and the realized capital gains from that transaction would apply to my year 2015 income since it actually took place in 2015 (and what I do with it - fund my 2014 IRA or buy tacos or whatever, is irrelevant), correct?
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No. Only cash can go into IRAs.
This couldn't be more wrong.
What? I don't know of any way to transfer non-cash assets to an IRA. Once the cash is in there you can buy whatever you want (even houses if you pick the right custodian), but you can't just directly move stock you already own into the account.
401k rollover. But that's it as far as I know.
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Can I reclassify from a tIRA to a roth or vice versa? Or if I pick one and make a contribution early in the year is that a permanent unchangeable contribution? Like if I funded a roth for $5500 today, then realized later on that I fucked up and should have done a tIRA instead of roth am I just fucked?
That is called a recharacterization. You have until your tax filing deadline (usually April 15th of the following year) to do it. Which reminds me - I need to finish up our taxes so I know how much we can move to traditional from 2014.
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Accordingly to this, only cash. Sell the shares in the taxable acct, transfer cash to IRA then repurchase.
http://finance.zacks.com/move-shares-taxable-account-ira-10343.html
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Another follow up question:
Can I sell $5500 worth out of a taxable account in 2015 (and I had held them greater than one year), and then use that money to fund my 2014 IRA, and the realized capital gains from that transaction would apply to my year 2015 income since it actually took place in 2015 (and what I do with it - fund my 2014 IRA or buy tacos or whatever, is irrelevant), correct?
That is correct. The sales transaction would take place in 2015, so you would report the gain on your 2015 tax return. You can then do what you please with the proceeds...2014 IRA contribution, 2015 IRA contribution, buy me tacos, etc.