Generally speaking, a recharacterization moves money from a traditional IRA to a Roth IRA—or vice versa. More specifically, it changes the designation of a specific contribution from one type of IRA to the other.
Recharacterizations are tax-reportable and could be complicated. We recommend that you review this strategy with a qualified tax advisor to weigh the tax benefits and ensure everything is reported properly.
You may have contributed to a traditional IRA because you thought your income was going to be too high to be eligible for a Roth IRA contribution. But if your income ended up being lower than you expected, you may prefer to take advantage of the Roth IRA.
A recharacterization lets you move that year's contribution to a Roth IRA, which offers the ability to take tax-free withdrawals in retirement.*
You may have contributed to a Roth IRA, but while preparing your tax return, you realize that either:
A recharacterization lets you move that year's contribution—in whole or in part—to a traditional IRA.
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Your contribution must be recharacterized on or before your tax-filing deadline for the year for which it was made.
The IRS generally provides an extended time frame—until October 15—to complete your recharacterization. (You may be required to file an amended return at that time.)
Learn how Vanguard reports recharacterizations for your taxes
Vanguard has adopted the method set forth in IRS Notice 2000-39 and Proposed Regulations 1.408-11 to calculate the earnings or losses for a recharacterization.
The calculations are based on ALL assets in your IRA plan, not just the fund contributed to. For partial recharacterization, the client may choose the date(s) of the original contribution that they would like to be used in the calculation for earnings/loss.
Additional information and examples can be found at irs.gov under IRS Publication 590-A, Contributions to an IRA. For a more detailed explanation of publication 590-A and examples of how to calculate your own earnings or loss please visit the IRS website.
A chart to help with earnings/loss calculation can be found on that webpage under "Worksheet 1-3. Determining the Amount of Net Income Due to an IRA Contribution and Total Amount to be Recharacterized"
You can complete most recharacterization using the IRA Recharacterization Form below. Or you can call one of our experienced retirement specialist at 800-205-6189 for live help.
Remember, a Roth conversion completed after December 31, 2017, can no longer be recharacterized back to a traditional IRA later.
Talk with an experienced retirement specialist.
Call 800-205-6189
Monday through Friday
8 a.m. to 8 p.m., Eastern time
Call 800-205-6189
Monday through Friday
8 a.m. to 8 p.m., Eastern time
Call 800-205-6189
Monday through Friday
8 a.m. to 8 p.m., Eastern time
*Withdrawals of Roth IRA contributions are generally tax-free and penalty-free. But if you're under age 59½ and your withdrawal dips into your earnings—in other words, if you withdraw more than you've contributed in total—you could be subject to both taxes and penalties on the earnings portion of the withdrawal.
All investing is subject to risk, including the possible loss of the money you invest.
Neither Vanguard nor its financial advisors provide tax and/or legal advice. This information is general and educational in nature and should not be considered tax and/or legal advice. Any tax-related information discussed herein is based on tax laws, regulations, judicial opinions and other guidance that are complex and subject to change. Additional tax rules not discussed herein may also be applicable to your situation. Vanguard makes no warranties with regard to such information or the results obtained by its use, and disclaims any liability arising out of your use of, or any tax positions taken in reliance on, such information. We recommend you consult a tax and/or legal adviser about your individual situation.