How Do I Convert My Traditional IRA to a Roth IRA?

A Roth IRA conversion allows you to move money from a Traditional IRA into a Roth IRA. While the amount converted is generally taxable in the year of the conversion, qualified Roth IRA withdrawals can be tax-free in retirement.

Many taxpayers choose a Roth conversion because Roth IRAs offer tax-free growth and tax-free qualified distributions, and Roth IRAs are generally not subject to required minimum distributions (RMDs) during the original owner's lifetime.

Ways to Convert a Traditional IRA to a Roth IRA

There are three common ways to complete a Roth conversion.

Rollover Conversion (60-Day Rollover)

With a rollover conversion:

1. You withdraw funds from your Traditional IRA.
2. You deposit those funds into a Roth IRA.
3. The deposit must be completed within 60 days of receiving the distribution.

If the funds are not deposited into the Roth IRA within the 60-day period, the IRS may treat the transaction as a taxable distribution rather than a Roth conversion.

Because missing the deadline can have significant tax consequences, many taxpayers prefer a direct transfer method instead.

Trustee-to-Trustee Transfer

With a trustee-to-trustee transfer:

1. You instruct the financial institution holding your Traditional IRA to transfer funds directly to a Roth IRA.
2. The funds move directly between financial institutions without passing through your hands.

This method helps eliminate the risk of missing the 60-day rollover deadline and is often the preferred conversion method.

Same Trustee Transfer

If both accounts are held at the same financial institution, you may be able to complete a direct internal transfer.

With this method:

1. Your Traditional IRA and Roth IRA remain with the same custodian.
2. The institution transfers the funds internally.
3. No 60-day rollover deadline applies because the funds never leave the institution.

This is often the simplest and fastest conversion option.

Are There Income Limits for Roth Conversions?

No.

There are currently no income limitations on Roth IRA conversions.

Even if your income is too high to contribute directly to a Roth IRA, you can generally still convert funds from a Traditional IRA to a Roth IRA.

This is one reason Roth conversions are commonly used as part of a "backdoor Roth" strategy.

Do I Pay Taxes on a Roth Conversion?

Usually, yes.

Traditional IRA contributions are often made with pre-tax dollars. When those funds are converted to a Roth IRA, the taxable portion of the conversion is generally included in your income for the year.

The taxable amount depends on several factors, including:

• Whether you deducted your Traditional IRA contributions
• Whether you have after-tax basis in any Traditional IRA
• Whether Form 8606 is required to calculate nontaxable amounts

How Is a Roth Conversion Reported?

A Roth conversion is generally reported using:

• Form 1099-R, issued by the financial institution distributing the funds
• Form 8606, used to determine the taxable and nontaxable portions of the conversion

Even if the entire amount is converted directly into a Roth IRA, the transaction must still be reported on your tax return.

What Is the Roth IRA 5-Year Rule?

Converted amounts are generally subject to a separate 5-year holding period.

If you're under age 59½ and withdraw converted funds before the applicable 5-year period has been satisfied, part of the distribution may be subject to the 10% additional tax unless an exception applies.

It's important to note that:

• The 5-year conversion rule applies to converted amounts.
• A separate 5-year rule may apply when determining whether Roth IRA earnings can be distributed tax-free.

Because multiple Roth IRA timing rules can apply, maintaining records of conversion dates is important.

Common Roth Conversion Questions

Can I Convert Only Part of My Traditional IRA?

Yes.

You can convert all or part of your Traditional IRA balance. Partial conversions are common when taxpayers want to manage their taxable income from year to year.

Can I Undo a Roth Conversion?

No.

Roth conversion recharacterizations are no longer permitted. Once a conversion is completed, it generally cannot be reversed.

Will I Receive Tax Forms for the Conversion?

Typically, yes.

You will generally receive:

• Form 1099-R reporting the distribution from the Traditional IRA
• Form 5498 reporting the Roth IRA contribution received through the conversion

Remember that Form 5498 is generally informational and is not entered directly on your tax return.