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Roth IRA Conversion Deadline

I’ve recently gotten a few questions about the deadline for a Roth IRA conversion. The answer is that it depends on what, exactly, you want to know the deadline for.

The shortest answer is that, for any given year, the deadline for a Roth IRA conversion is December 31 of that year. (Note: This is different from IRA contributions, which can be made up until April 15 of the following year.)

There are a few other Roth conversion-related deadlines you may want to know about, though.

Income Limits Are Gone for Good

As of 2010, the income limits for Roth IRA conversions disappeared. They are not scheduled to come back. In other words, no matter your income level, Roth conversions are not “do it in 2010 or miss your chance.”

Why 2010 Is Special

December 31, 2010 is the deadline, however, for the special option to delay payment of the tax on a Roth conversion. That is, for 2010 Roth conversions, if you choose to do so, you can claim 50% of the converted amount as income in 2011 and the other 50% in 2012.

Beginning in 2011, Roth conversions will go back to working like normal — if you convert in a given year, you’ll have to claim the converted amount as income in that same year.

Roth Conversion Recharacterization Deadline

In case you’ve never run across the term before: A “Roth conversion recharacterization” is basically a do-over. If you convert an amount from a traditional IRA to a Roth IRA, you’re allowed to undo the whole thing as long as you don’t wait too long.

To do so, you’ll have to:

  1. Notify the custodian(s) of your traditional IRA and your Roth IRA of your intention to recharacterize the conversion,
  2. Transfer the amount in question from the Roth IRA back to the traditional IRA, and
  3. If you’ve already filed your tax return for the year of the conversion, you’ll have to amend that return.

The deadline for recharacterizing a Roth IRA conversion is October 15 of the year following the conversion.

Just Because You Can…

One last point: Just because you can convert your IRA to a Roth IRA doesn’t mean you should convert it.

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  1. Hi Mike, I have another tax related question for you. If you were to convert to a Roth IRA could you withdraw that money tax and penalty free as if it were a contribution?

  2. Good question. The answer is that you still have to jump through some hoops (unlike with regular Roth contributions).

    For more info, see the headings “Distributions after a Roth Conversion” and “Order of Distributions” from this article.

  3. Thanks for the link Mike. Very good article on ditributions!

  4. A simple question: Suppose somebody makes too much money to qualify for a tax deduction for IRA contributions. Is there to keep money in a traditional IRA, or is it therefore always a better move to contribute to a traditional IRA then convert?

  5. Off the top of my head, I can’t think of any reasons why an investor who is ineligible for a Roth or for a deduction from traditional contributions would opt not to convert any traditional IRA contributions they made.

    Unless, that is, the investor had also made some traditional IRA contributions in the past that were deductible. (The complicating factor in such a case being that any amounts converted would be partially taxable and partially nontaxable, so it’d be important to consider whether it’s worth paying the related tax or not.)

  6. Hi Mike –
    You know how we PFers are sticklers for detail.
    “can pay 50% of the related tax in 2011 and the other 50% in 2012” is a bit off. You can choose to split the conversion amount over the two years and each year that extra income will have its own effect on your tax owed. For some, those two tax amounts can vary widely, depending on one’s circumstance.

  7. Oh jeez. That’s an embarrassing mistake. Correcting it now….

    Thank you!

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