SPOUSAL ROLLOVERS AND THE ONCE-PER-YEAR ROLLOVER RULE:  TODAY’S SLOTT REPORT MAILBAG

Thursday, February 20, 2025

By Ian Berger, JD
IRA Analyst

Question:

Dear Ed Slott and America’s IRA Experts,

I have a rollover traditional IRA that was set up when I left my last job. I am no longer employed, so I don’t have any earned income. My husband works full time, and our filing status is married filing jointly.

I would like to know if I am able to contribute to a newly established traditional IRA account with no balance and then convert it to a Roth IRA. Also, when I convert the new traditional IRA to a Roth IRA, do I have to consider the assets in the rollover traditional IRA and calculate the taxes on a pro-rata basis? Or do I calculate taxes owed on the converted Roth dollars using only the contribution from the new traditional IRA? Lastly, is this conversion strategy limited by income levels?

Sincerely,

Anna

Answer:

Hi Anna,

As a spouse, you are allowed to use your husband’s compensation to open up a traditional IRA for yourself. (This assumes his compensation is high enough to cover your IRA and any IRA he opens for himself.) When you convert your traditional IRA to a Roth IRA, the pro-rata rule does require you to take into account your rollover IRA (and any other IRAs or SEP or SIMPLE IRAs you may have) to determine the taxation of the conversion. The good news is that there are no income limits on converting to a Roth IRA.

Question:

Can a person do 60-day rollovers from both their traditional and Roth IRAs in the same 365-day period?

Answer:

Traditional and Roth IRAs are combined for purposes of the once-per-year rollover rule. So, a distribution and subsequent rollover between your Roth IRAs will prevent another rollover of a distribution and rollover between your traditional IRAs if the distribution of the traditional IRA occurs within 365 days of the distribution of the Roth IRA. The same would be true if the traditional IRA distribution and rollover comes first.

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