Roth Conversion and Recharacterization

Submitted by THOMAS WNUK on Mon, 2021-01-25 15:24

If I convert some rollover IRA funds to a Roth now and recharacterize BEFORE 12/31/2021 can I leave any gains in the Roth? I understand that the gains must sit for 5 years before they can be withdrawn tax free.

Also would a form 8606 need to be filed?



Submitted by David Mertz on Mon, 2021-01-25 16:11

Recharacterizations of Roth conversions are no longer permitted due to the tax-code changes of the Tax Cuts and Jobs Act of 2017.
Even if recharacterizations of Roth conversions were still permitted, the net income attributable to the amount being recharacterized would be required to be included as part of the funds being moved as a recharacterization.  The net income attributable is calculated based on the investment performance over the entire account from which the recharacterization is performed, not on any particular investment within the account.

Submitted by THOMAS WNUK on Mon, 2021-01-25 20:20

Thanks for the info. So much for the idea  of “borrowing” from one IRA to help another.

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