3 Important IRA Rollover Rules to Know

Thinking about moving money from one IRA to another? An IRA rollover can be a useful way to move retirement funds without triggering taxes, but there are some important rules you need to follow.

Here are three IRA rollover rules you should know before moving your money.

1. Remember the 60-Day Rollover Rule

Generally, if you receive a distribution from your IRA and want to roll the money back into an IRA, you have 60 days to complete the rollover. If you miss that deadline, the distribution could become taxable. However, the IRS does provide some relief in certain situations. You may be able to complete a late rollover if you qualify for one of the IRS's 12 approved reasons for missing the 60-day deadline. If you qualify, you can generally self-certify that you are eligible for a waiver of the 60-day requirement. The rollover must then be completed within 30 days after the reason for the delay is resolved. If you don't meet the requirements for self-certification, you may need to request a private letter ruling from the IRS, which also comes with a user fee.

2. You Must Rollover the Same Property

Another important rule is that you generally need to roll over the same property you received from the IRA. For example, if you take a cash distribution, the rollover needs to be made with cash. If you receive 75 shares of Apple stock from your IRA, you generally need to put those same 75 shares back into an IRA for the rollover.

In other words, you can't take stock as a distribution, sell it, and then roll over different property instead.

3. Watch the One-Rollover-Per-12-Month Rule

There is also a rule that generally limits you to one IRA-to-IRA rollover within a 12-month period. One important detail: this rule applies to your IRAs collectively, rather than separately to each IRA. So, if you have multiple IRAs, you can't necessarily complete one rollover from each account every 12 months and assume each one gets its own rollover limit.

There is good news, though. Direct trustee-to-trustee transfers aren't considered rollovers, so you can generally make unlimited direct transfers between your IRAs without triggering the one-rollover-per-12-month limitation. The same generally applies when you receive a check made payable to the new IRA for your benefit rather than a check made payable directly to you.

The Bottom Line

IRA rollovers can be helpful, but the rules surrounding them can be easy to overlook. Before taking money out of an IRA with the intention of rolling it into another retirement account, make sure you understand the 60-day deadline, same-property requirement, and one-rollover-per-12-month rule. A mistake could result in unexpected taxes or penalties, so if you're unsure about how a rollover should be handled, consider talking with a qualified tax professional before moving the money.