Recharacterize Roth IRA contribution to backdoor Roth?

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  • #93651 Reply

      I could use some help with a Roth IRA. My wife and I contributed the max for 2023, and now we’re realizing that we earned too much this year to qualify. Can I reclassify these funds and do a backdoor Roth? If so, would I open a traditional IRA (even though we earned over the amount to qualify,) move the funds there, and then fund a backdoor Roth? I’ve tried googling, but I’m not finding a description of this particular scenario.

      #93652 Reply

        There’s no income limit for a traditional ira, so opening one at any income is fine. Then you’ll recharacterize the Roth contributions to traditional (call the brokerage to do this), and then convert it to Roth.

        Since the conversion is this year, you’ll have to sort out tax implications on this year’s taxes (next spring).

        Make sure form 8606 is correct for 2023’s taxes and for 2024’s taxes.

        #93653 Reply

          You would open a Traditional IRA and call your custodian to request a recharacterization from Roth to Traditional. You will also file Form 8606 Part I with your 2023 tax return to report your non-deductible Traditional IRA contribution.

          There are no income limits for Traditional IRA contributions – only their deductibility.

          Also, check out: How to file taxes for Roth IRA contribution under $600?

          #93654 Reply

            Don’t worry. It happens and it’s not a big deal. Just call them up and open a traditional ira account, ask them to recharacterize the contribution to traditional, wait for that to happen, and then do the conversion.

            At tax time this year, you will fill out form 8606. You won’t have any documents. You won’t get any deductions. Next year, you will get a form for the conversion for your 2024 taxes. You carry over the 8606 balance from 2023 and it offsets the taxable conversion. If there was growth in the account, that part will be taxable.

            #93655 Reply

              Yes recharacterize. Provided you have no pretax ira balances it will be no issue.

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