I’m following the lead from my own post Huge Bonus Offers From Brokers: Fidelity, Schwab, TD Ameritrade, ETrade, Merrill Edge. Although I’m satisfied with the service of WellsTrade brokerage account provided by Wells Fargo Advisors, the huge bonus offered by its competitors is just too good to pass up.
I moved my brokerage account from Wells Fargo to TD Ameritrade because TD Ameritrade pays a signup bonus of up to $1,000. An in-kind transfer does not involve any buy or sell. I still have the same investments. They are just held at a different place.
The transfer completed in less than 10 days. TD Ameritrade paid the promised bonus into my account on the same day the transferred assets arrived. The instant gratification felt really good. Now, is this bonus taxable?
As with almost everything, the answer is it depends.
The bonus is treated the same way as interest earned in the account. If the account is a regular taxable account, the bonus will be taxable. I expect the year-end 1099 will include this bonus.
If the account is a traditional IRA, there won’t be a 1099 and therefore it won’t be taxable in the current year. But because the bonus stays in the IRA and it grows tax deferred, eventually when your withdraw the money after you retire, the money will be taxable at that time.
If the account is a Roth IRA, the bonus isn’t taxable either now or in the future. Score!
So far so good with TD Ameritrade. It offers commission-free trades on 101 ETFs. These are good ETFs. 32 of them are from Vanguard; 47 from iShares. All my current ETF holdings are on the list. All the ETFs that I potentially will invest in are on the list. Therefore even though TD Ameritrade isn’t as open-ended as Wells Fargo where online trades are free for everything, I don’t foresee paying any commission on the trades that I will make at TD Ameritrade.
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