Tax reform impacts on Roth recharacterizations | American Funds

News

April 13, 2018

Tax reform impacts on Roth recharacterizations

The 2018 tax reform legislation includes a provision that eliminates the ability to recharacterize or undo a conversion to a Roth IRA. This change affects any conversion to a Roth IRA that occurs in 2018 or later.

What is no longer allowed

  • Undo conversions from a Traditional, SEP, SARSEP or SIMPLE IRA to a Roth IRA
  • Undo rollovers of pre-tax assets from a qualified retirement plan (e.g.,  401(k), MPPP, PSRP) directly to a     Roth IRA

What is still allowed

  • Redesignating a Roth IRA contribution as a Traditional IRA contribution
  • Redesignating a Traditional IRA contribution as a Roth IRA contribution
  • For Roth conversions processed in 2017, investors have until their tax-filing deadline with extensions to     undo the conversion

For more information on recharacterizations, consult a tax advisor and/or refer to IRS Publication 590-A (PDF)


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Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

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