New IRA Rollover Limit: Court Case Changes the Rules

Generally, when a distribution from an IRA is repaid within 60 days, it isn’t included in gross income. An individual is permitted to make only one such rollover during any one-year period.

At the beginning of the year, IRS Publication 590, Individual Retirement Arrangements (IRAs), stated that this limitation is applied on an IRA-by-IRA basis. However, in March 2014, the Tax Court determined that the limitation applies on an aggregate basis, meaning that an individual could not make an IRA-to-IRA rollover if he or she had made such a rollover involving any of the individual’s IRAs during the preceding one-year period.

Because of this Tax Court opinion, the IRS changed Publication 590. Starting January 1, 2015, you can make only one rollover from a traditional IRA to another (or the same) traditional IRA in any 12-month period, regardless of the number of IRAs you own. A similar limitation will apply to rollovers between Roth IRAs. You can, however, continue to make as many trustee-to-trustee transfers between IRAs as you want. Amounts transferred between traditional IRAs, either by rollover or trustee-to-trustee transfer, are excluded from your gross income.