Recharacterize an IRA contribution

Have you made a Traditional IRA contribution and want to switch it to a Roth IRA contribution—or vice versa? You may be able to. We'll walk you through it.

What's a recharacterization?

Let's say you've made a wise retirement move and contributed to a Roth or Traditional IRA. But you've changed your mind and want to reclassify it as a contribution to the other type of IRA. The IRS lets you—it's called a recharacterization.

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3 times this move could benefit you

You want the tax deduction from a Traditional IRA: Roth contributions are never tax-deductible, while Traditional contributions may be. So perhaps you've contributed to a Roth and realized you'd be eligible for a deduction if you had contributed to a Traditional IRA. Recharacterizing may make sense.

You want tax-free earnings from a Roth1: Earnings in a Roth are free from federal tax, while Traditional IRAs simply defer taxes on earnings until they are withdrawn at retirement. So let's say you've made a Traditional IRA contribution. Recharacterizing to a Roth IRA might give you the benefit of tax-free earnings. Keep in mind, if you are eligible to deduct your Traditional IRA contribution, it will no longer be deductible if you recharacterize to a Roth. Since Roth IRAs have income limits, you want to make sure you're eligible to make a Roth IRA contribution before your recharacterize.

Your income is too high for a Roth: Roth IRAs have income limits that prohibit contributions when your income is too high, while Traditional IRAs do not (but your contribution may not always be deductible). So maybe you've made a Roth contribution and realized your income's above the limit. Recharacterizing to a Traditional IRA (as long as you have earned income) would correct your mistake.

Note: Before recharacterizing, make sure your are familiar with the eligibility requirements for the type of IRA you are recharacterizing to: Traditional IRA income limits, Roth IRA income limits. If your income's too high for a Roth, and you don't want to keep track of a non-deductible IRA contribution, removing the money as an excess/unwanted contribution might be an option.

5 things to know before you start

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1. Deadline to complete

You need to finish a recharacterization by your tax filing deadline plus extensions, normally October 15. You must file your taxes timely or file an extension to be eligible to complete your recharacterization by the extended deadline.


2. Forms needed

To start a recharacterization, complete the Fidelity's online formLog In Required. You'll need to know the date your original contribution was deposited. If you made multiple contributions throughout the year, use the date of the earliest contribution.

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3. Earnings calculation

The IRS requires an earnings calculation to be completed on the traditional IRA or Roth IRA that received your original contribution. Don't worry, Fidelity will do the math for you. Keep in mind: the amount you recharacterize is generally higher or lower than your original contribution amount, depending on how your account performed. View an example of the calculation


4. Assets you want to transfer

You can choose to move cash or securities between your IRA accounts. Before starting a recharacterization, you should determine which securities you'd like to transfer. Otherwise, Fidelity will transfer assets in the following order:

1. Cash
2. Fidelity mutual funds
3. Non-Fidelity mutual funds
4. Stocks

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5. Tax reporting

The final, critical step for you and your tax professional is to report your recharacterization properly to the IRS on your taxes. Here's how Fidelity will support you:

  • Fidelity will create IRS Form 1099-R to report your recharacterization in the year that you recharacterize.
  • Fidelity will report in Box 7 of IRS Form 1099-R whether you recharacterized a contribution for the current or prior year.
  • Fidelity will report the recharacterized contribution to the receiving IRA or Roth IRA in Box 4 of IRS Form 5498 in the year that you recharacterize.
  • Fidelity creates a letter with the details of your recharacterization to help with the reporting process. The letter will be available under documents and account records for your accounts once your recharacterization is complete.

You can find more information on recharacterizations in IRS publication 590-A and the instructions for IRS Form 8606.