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)


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

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.