Recharacterization of earnings
Client wants to recharacterize 2012 $6,000 Roth IRA contribution to his Rollover IRA to reduce tax liability for 2012. Earnings on this 2012 contribution calculated at $643. Does he get to recharacterize full amount ($6,000 contribution and $643 earnings) to his Rollover IRA, or is he limited by the over age 50 $6,000 limit with the earnings returned to him?
If he can recharacterize the full $6,643 to his Rollover IRA, can he deduct this full amount from his 2012 taxes?
Thanks!
Permalink Submitted by Alan - IRA critic on Fri, 2013-04-05 22:17
If he recharacterizes the full contribution, the full 6,643 transfers to the TIRA. This has no affect on the original contribution which is still 6,000 and the most that can be deducted. If this is being done to reduce taxes, be sure that client can deduct this contribution since the deduction may not be possible if his modified AGI is too high and he is covered by a plan at work. On the other hand, if he qualifies for a Roth contribution, that is better than a non deductible TIRA contribution.
Permalink Submitted by Charles Stanley on Mon, 2013-04-08 13:21
Thanks Alan! He does qualify as he is not covered by a plan and is under the AGI limit. chuck