IRA Recharacterizations

An IRA recharacterization is a process that allows you to change the nature of a contribution made to an IRA from one type to another. For example, if you contributed to a Roth IRA but later decide it would have been more beneficial to have made the contribution to a Traditional IRA (or vice versa), you can recharacterize the contribution.

Here’s how it works:

• Recharacterization: You effectively move the contribution and any associated earnings from one type of IRA to another. This adjustment is done by transferring the funds and their earnings to the correct IRA account.
• Timing: Recharacterizations must be completed by the tax filing deadline (including extensions) for the year in which the contribution was made.

For more details please visit IRS Publication 590-A.

Can I recharacterize a rollover or conversion to a Roth IRA?

As of January 1, 2018, under the Tax Cuts and Jobs Act (Pub. L. No. 115-97), Roth conversions from a Traditional IRA, SEP, or SIMPLE IRA to a Roth IRA cannot be recharacterized. Additionally, the new law prohibits recharacterizing amounts rolled over to a Roth IRA from other retirement plans, such as 401(k) or 403(b) plans.