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Tax implications of moving an account through the ACATS system

Published | Updated

When switching your accounts to Betterment, it’s important to understand the potential tax implications, particularly for taxable accounts. Here’s a breakdown of what you should know:

IRA Accounts:

  • No Taxes or Penalties: Transferring your IRA to Betterment is done through a direct trustee-to-trustee transfer, which means there are generally no taxes or penalties involved.
  • Investment Process: Once your IRA assets are transferred, Betterment will sell any in-kind investments and use the cash proceeds to buy shares of the ETFs that align with your target Betterment IRA portfolio.

Taxable Accounts:

  • Investment Strategy: Your investments will stay invested during the ACATS transfer process. After the transfer, Betterment’s rebalancing system will work to align your portfolio with your target Betterment strategy.
  • Handling ETFs: If the ETFs you’re transferring match those in your Betterment portfolio, we will incorporate them. We only sell excess shares if they throw off your portfolio’s balance.
  • Handling Mutual Funds and Foreign ETFs: Any mutual funds or ETFs that do not match Betterment’s portfolio will be sold, and the proceeds will be used to purchase new shares in line with your target portfolio.
  • Selling at Gains/Losses: Betterment will avoid selling any shares that are trading at a short-term gain (which are taxed at higher rates). We’ll only sell shares at a long-term gain or loss. Over time, our system will monitor your holdings and rebalance when short-term holdings turn into long-term ones or start trading at a loss.

Single Stocks:

  • Any single stocks transferred into Betterment may be sold to help align your portfolio with your target strategy. For more information on the potential tax impacts, refer to our Tax Coordination FAQ.

Important Notes:

  • Betterment is not a licensed tax advisor. The information provided here is for educational purposes only. Always consult a qualified tax advisor for personalized advice.
  • If you need help or have questions, reach out to our transfer team at
    transfers@betterment.com for support.