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Advisor Insights

Where Recharacterization Is Alive and Well

Although the new tax law placed some limits on IRA recharacterizations, the technique can still be used in certain situations in 2018 and beyond.

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Since 1998 (when Roth IRAs were invented), Section 408A(d)(6) of the Internal Revenue Code has permitted a taxpayer to "recharacterize" his or her IRA contribution. A contribution to a Roth IRA could be "recharacterized" as a contribution to a traditional IRA and vice versa.