Roth IRA Conversion Recharacterization Deadline Approaching October 15, 2018

MACRO Consulting Group
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Pursuant to the Tax Cuts and Jobs Act (TCJA), which went into effect on January 1, 2018, the conversion of a traditional IRA to a Roth IRA will no longer have the ability to be undone. From a tax planning perspective, this element of the previous tax law allowed clients to convert traditional IRA assets to Roth IRA assets quite freely, as we have, in the past, had the ability to go back and “start over.” As an example, if you inadvertently ended up in the 33% tax bracket by converting $75,000 of traditional IRA assets to Roth IRA assets in 2016, you had the ability to send $15,000 back to your traditional IRA to ensure you stayed in the 28% bracket.

Recharacterizing a Roth conversion was an aspect of the previous tax law that allowed you to “undo” the conversion amount through October 15th of the following tax year, with October 15, 2018, marking the end of this feature.

Since we are now in the month of September, we wanted to give you ample notice of the change to the tax law so you can discuss with your tax advisor if needed. If you made Roth conversions without the guidance of a financial advisor or your accountant, and you were surprised by your 2017 tax bill, a discussion with a financial advisor or accountant can help you determine if the recharacterization may be worth considering.

Use the following link to review a summary of the changes on the IRS website:

MACRO Consulting Group does not offer tax advice and advises that you consult with an accountant or other tax professional in regard to your personal situation.