ARTICLE TAKEAWAYS
When IRA owners want to change the designation of an IRA contribution, they can move the contribution from one type of IRA to another: a traditional IRA contribution can be recharacterized to a Roth IRA contribution or vice versa.
When a contribution is recharacterized, the amount, including adjustments for earnings or losses, is moved to the other type of IRA.
For specific details regarding eligibility and tax implications, consult a tax advisor.
To change a contribution between two Capital Bank and Trust Company (CB&T) IRAs, complete the Traditional and Roth IRA Recharacterization Request (PDF). If you are recharacterizing a contribution into a new CB&T IRA, contact your financial professional for an account application. If you need helping finding a financial professional, contact us here.
The deadline for processing a recharacterization is the IRA owner’s tax-filing deadline plus extensions, normally October 15.
Recharacterizing an IRA contribution is a tax-reportable event. The amount moved is considered a contribution into the receiving IRA and falls under that type of IRA’s “traditional or Roth” tax guidelines.
Form 1099-R reports the distribution amount of the recharacterization and is generally sent at the end of January. Form 5498 reports the contribution amount of the recharacterization and is generally sent in late May. Visit the Tax Center for more information on these tax forms.
Note: The amount recharacterized may be different than the amount originally contributed. Earnings and losses are calculated for the entire account, not just a specific investment. As a result, the appreciation or depreciation of all funds in the account is included in the earnings calculation.