Recharacterize Roth IRA to Traditional IRA

Hi Mherc, I can walk you through the process of reporting the recharacterization on your 2025 tax return. There are two parts to reporting a recharacterization in the software: 1) entering the 1099-R information in the Income section for the distribution from the Roth IRA and 2) entering the IRA contribution in the Deductions/Credits section. Let's look at each step.

STEP 1: Entering the 1099-R information
Since it sounds like the recharacterization will be taking place in 2025, you should receive a Form 1099-R reporting the recharacterization at the beginning of 2026 and can enter that on your 2025 tax return. The 1099-R you receive will likely have code N in Box 7, which indicates a recharacterized IRA contribution made for 2025 and recharacterized in 2025. Go to Income > Common Income > Retirement Income (1099-R) and add the information. The distribution code of N will cause the distribution to be treated as zero taxable income.

STEP 2: Entering the IRA contribution
Go to Deductions/Credits > Common Deductions/Credits > IRA Contributions. Answer YES when asked if you made any traditional or Roth IRA contributions during 2025. You'll be prompted to enter your contributions. A Roth IRA contribution that was later recharacterized as a traditional contribution should be entered as a Roth IRA contribution on that screen. Further down the screen, answer YES when asked if you recharacterized any IRA contributions.

The next screen you come to should ask more about the recharacterization. Answer YES when asked if you recharacterized any of the $8,000 to a traditional IRA. You'll be prompted to enter the date of the original Roth IRA contribution, the date of the recharacterization, the portion of the $8,000 that was recharacterized (not including any earnings), the total amount transferred to a traditional IRA (does include any related earnings), and the reason for the recharacterization.

Now you should be good to go. The IRS says you should treat any earnings that occurred in the first IRA (the Roth) as having occurred in the second IRA (the traditional), so there shouldn't be any taxable income to report from the recharacterization.

I hope this helps clear up any confusion.

After performing the recharacterization, do you plan to convert the amount in the traditional IRA back to a Roth IRA (perform a backdoor Roth)? If so, things get a little more complicated, but there's a helpful article on our Community that walks you through the process of entering everything in the software.