Brokerage account transfers: 9 myths about taxes, fees, and in-kind ACATS moves

Transferring a brokerage account means moving your investments from one broker to another. It can be faster, cheaper, and less taxing than investors expect: an in-kind transfer (through the ACATS system) moves your eligible holdings as-is, so generally little or nothing is sold. 

That’s why “Can I transfer an existing account to M1?” is one of the most common questions clients ask — and the answer is yes. But as with most things in investing, there’s nuance worth understanding first. We condensed thousands of client questions into the nine most common myths about the transfer process — here’s what’s actually true.

What is an ACAT transfer?

An ACAT transfer is the standard way to move a brokerage account from one firm to another. ACAT stands for Automated Customer Account Transfer, and it runs through the Automated Customer Account Transfer Service (ACATS) — the industry system operated by the National Securities Clearing Corporation (NSCC, a DTCC subsidiary) that moves your account firm-to-firm. Most ACAT transfers are done in-kind, so your holdings move as-is without being sold, and a standard transfer typically completes in about five to seven business days. The firm-to-firm transfer obligations are governed by FINRA Rule 11870.

What is an in-kind transfer?

An in-kind transfer moves your investments — stocks, ETFs, and many mutual funds — from one brokerage to another without selling them. Because nothing is sold, it generally doesn’t create a taxable event. Your positions, cost basis, and holding period all move with you. 

One limitation to plan for: not every asset can move in-kind. Some proprietary funds or certain securities may have to be sold first, which could create a taxable event. Before you start, ask both your current and receiving broker which holdings are transferable in-kind, so you can plan around any exceptions.

Is transferring a brokerage account a taxable event?

Generally, no. When you move investments through an in-kind transfer (also called an ACATS transfer), your eligible holdings move to the new broker as-is, without being sold — so the transfer itself typically does not trigger capital gains tax. Some holdings — such as fractional shares or securities the receiving broker can’t hold — may need to be sold and moved as cash, which can create a taxable event. According to the IRS, capital gains tax generally applies only when you sell an investment at a gain, and a transfer is not a sale. 

Your cost basis and holding period generally carry over to the receiving broker, so your future tax picture stays intact. Because cost-basis information doesn’t always transfer cleanly, it’s worth keeping your own records of what you originally paid — errors can affect any taxes you may owe later. 

There is one common exception: if you choose to liquidate (sell) your holdings and move the cash instead of transferring in-kind, any gains you realize may be taxable in that year. In-kind transfers avoid that outcome by keeping you invested throughout the move.

Myth 1: Do you pay taxes when you transfer a brokerage account?

Not necessarily. As covered above, an in-kind transfer generally isn’t a taxable event — taxes typically only come into play if you liquidate holdings in a taxable account (like an individual or joint account) and move the cash, which can trigger capital gains on the sale. 

The amount you owe depends on your income, filing status, the type of securities you have, and whether the gains are short-term (assets held one year or less, taxed at ordinary income rates) or long-term (assets held longer than one year, taxed at lower long-term capital gains rates). The specific rates and income thresholds are set by the IRS and change annually, so check the current year’s figures — there’s no single number that applies to everyone. 

If your securities are held in a tax-advantaged account (like a retirement account), selling holdings inside the account to transfer typically doesn’t trigger capital gains tax, because buys and sells within these accounts aren’t taxable events. This includes many types of IRAs like traditional, Roth, or SEP. (Traditional accounts are generally taxed on withdrawal; qualified Roth withdrawals are generally tax-free.) 

You don’t have to liquidate your retirement account to transfer to another brokerage. You can move it in-kind, just like a taxable account. 

A note: 401(k) transfers are different. If you’re thinking about transferring a 401(k), an IRA rollover is one option some investors evaluate — but it isn’t right for everyone, and a rollover can have tax and fee consequences. The right choice for you depends on which type of account you currently have and you are encouraged to consult your personal investment, legal, or tax advisors.

Myth 2: How much does it cost to transfer a brokerage account?

The fees you pay to your current brokerage to close or transfer your account are often a misconception—here are three reasons why: 

1. Over time, a commission-free platform can potentially help compensate for transfer fees. 

Outgoing account transfer (ACAT) fees vary by firm — commonly in the range of about $50 to $100, though some firms charge more. Check each broker’s published fee schedule for the current amount. Let’s say your current brokerage charges fees for account management or purchasing new securities. If you transfer to a new brokerage firm that charges lower (or no) fees, you could potentially make up the difference. Of course, this depends on many different factors including how much money you have in your account and how often you update your portfolio. 

Learn more about how fees can impact a portfolio overtime with M1’s Compounding Cost Calculator. 

2. The fee could be lower than taxes you’d pay. 

You could potentially avoid the fee by liquidating your account and transferring the cash to a new brokerage. 

Generally, this would be considered a taxable event, meaning you’d have to pay taxes on your gains (the tax rate would vary based on the type of investments you have and how long you’ve held them). 

If the taxes are greater than the fee, the fee might be a good deal. But if you’re transferring an IRA, you typically don’t have to pay capital gains taxes on the pre-transfer sale of your securities. 

3. In-kind transfers can give you peace of mind. 

Even if the fee is larger than the amount you’d pay in taxes, you may still want to pay it simply for the convenience of having someone else handle the process for you. 

In other words, you can think of it as a peace-of-mind fee to make sure your money gets where you want it to be without having to worry about it. And, if you’re considering a transfer you’ve already decided that your new broker is better aligned with your investing strategy.

Myth 3: Does your cost basis transfer between brokers?

Brokers are generally required to transfer your cost-basis information to the receiving broker during a transfer under federal cost-basis reporting rules that took effect for stocks in 2011. Even so, it’s smart to keep your own copy of your cost basis (the original value of your investment) from your existing brokerage. 

Your cost basis generally carries over when you transfer. This can matter when you calculate taxes on gains from any sales you make later — and the same is true for any losses you may be trying to harvest.

Myth 4: Is transferring a brokerage account risky?

All investing activity comes with risk, but account transfers aren’t disproportionately riskier. 

Some people get nervous because you can’t make any changes to your portfolio while it’s in transit, usually about five to seven business days. 

During that short period of time, you’ll be unable to make any trades on the positions you are transferring. But if you’re primarily investing for the long term — say, for retirement or to save up for the down payment on a home — you probably wouldn’t have been making many trades anyway. 

After all, the whole point of long-term investing is to devise an investing plan that works on a longer time frame. Short-term fluctuations will happen whether you transfer or not, but they shouldn’t affect your strategy.

Myth 5: Can you transfer mutual funds between brokerages?

It depends on your new brokerage. You can transfer mutual funds as long as your new brokerage has an agreement in place to accept the funds or fund families you have money in. But if your new brokerage doesn’t offer the same mutual funds, it doesn’t have to be a deal-breaker. There are other ways to get your money transferred. 

For example, you could liquidate your mutual funds at your existing brokerage and transfer the cash, then reinvest in comparable funds at your new brokerage. 

Some clients also choose to transfer mutual funds, OTC securities, options, and bonds. If you’re interested in transferring, here’s how we’ll handle it:

• Mutual funds: Liquidate them and give you the cash, which you can reinvest as you see fit. 

• OTC securities: We offer some OTC securities through American Depository Receipts (ADRs). If we do not offer your specific OTC security, you can liquidate and reinvest. 

• Options: Let them expire. You can’t trade the option while it’s on our platform. If the option is in the money, we will automatically exercise it. You can also conduct a partial transfer excluding your options. 

• Bonds: Let them mature. You can’t trade these on M1 right now. 

If you have a question about your specific situation, get in touch with us at transfers@m1.com.

Myth 6: Can you transfer part of a brokerage account?

If you have an account with a major brokerage firm, it’s possible to move part of your account to another platform (including M1). Before doing so, be sure to have ready the securities and number of shares you would like to move. 

Some firms only allow full account transfers rather than partial ones, so check your current broker’s transfer policy before you start.

Myth 7: What happens to your dividends when you transfer?

When you switch to a new broker, your positions transfer to the receiving firm on your transfer date — at M1, typically within about five to seven business days after you initiate the transfer. If any dividends are paid to your old brokerage after that date, they are generally forwarded to your new account, though timing can vary by firm.

Myth 8: Does a transfer count toward your IRA contribution limit?

Transferring accounts between brokerages doesn’t count toward your retirement limit. When you transfer a brokerage account, you’re not adding money—you’re simply moving it. The same is true of 401(k) to IRA rollovers and qualified reservist repayments: you can make either of these transactions without affecting your contribution limit. 

Keep in mind, the IRS limits how much money taxpayers can contribute to IRAs (traditional and Roth) each year. These limits are set by the IRS and change periodically, so check the current year’s contribution limit before you plan around it.

Myth 9: Is it worth transferring brokerage accounts?

The process of transferring securities from one brokerage to another can be complex, but your part is straightforward. If you see a clear opportunity for your investments to potentially perform better—say, at a commission-free brokerage— simply take these steps for an automated customer account transfer (also called an ACAT transfer).

That’s it. Your new brokerage will handle the rest. 

This is likely no more than what you’re already doing as an engaged investor: researching your options and considering the costs and benefits of making one choice versus another. 

Plus, the brokerage you’re transferring to is motivated to help you move your funds quickly. The more customers it has, the more opportunities it has to earn revenue from those customers. If you’re curious how M1 makes money, learn more about the M1 revenue model. 

The reality is that moving to a new brokerage is no more or less complicated than the other transactions you’d make to manage your finances. If a new brokerage offers features you want that you can’t access through your current one, a transfer may be worth considering.

Frequently asked questions about brokerage account transfers

Investing involves risk, including the possible loss of principal. This article is educational information only and is not investment, legal, or tax advice; consult a qualified professional about your specific situation. Fees may apply — review M1’s current fee schedule and disclosures before making a decision.

Originally published October 21, 2020, updated July 20, 2026.

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