4 Things to Know about Rollovers Between Calendar Years
What You Should Know About IRA Rollovers Between Calendar Years
IRA rollover rules are already complicated, but rolling over an IRA distribution across calendar years adds another layer of complexity. As 2024 ends and 2025 begins, understanding how these rules work is critical. Timing, tax reporting, rollover limits, and required minimum distributions (RMDs) all come into play when the rollover spans two different tax years.
Distributions Taken Late in the Year Can Be Rolled Over the Next Year
Many IRA holders ask whether they can roll over a distribution taken in December of one year into the following year. The answer is yes. You are allowed to roll over an IRA distribution taken in one calendar year into the next—as long as you complete the rollover within 60 days of the distribution. For example, a distribution received on December 15, 2024, can be rolled over as late as February 13, 2025. This timing flexibility is helpful, but it does not exempt you from meeting the standard 60-day deadline.
Tax Reporting Follows the Distribution Year
If you take a distribution in 2024 and complete the rollover in 2025, you still report the transaction on your 2024 federal tax return. The financial institution that manages your IRA will issue a Form 1099-R for the 2024 distribution. It will also issue a Form 5498 in 2025 to confirm the rollover deposit. You need to report both the distribution and the rollover on your 2024 tax return, even though the deposit back into your IRA occurred in the new year.
The One-Rollover-Per-Year Rule Is Not Based on the Calendar
One of the most misunderstood rules about IRA rollovers is the limit of one rollover per 12-month period. This restriction applies across all your IRAs, not just one account, and is not based on the calendar year. The rule starts from the date you received the distribution, not from January 1. For instance, if you take a distribution on December 15, 2024, and roll it over in January 2025, you are not allowed to roll over another IRA distribution until December 16, 2025. This applies even if the new year has started. Misunderstanding this timing rule can result in an ineligible rollover and unwanted tax consequences.
Rollovers Affect Next Year’s RMD Calculations
An IRA rollover that crosses calendar years can influence how your required minimum distribution is calculated for the following year. If you take a distribution in late 2024 and roll it over in early 2025, the amount rolled over must still be included in the fair market value of your IRA on December 31, 2024, for the purposes of determining your 2025 RMD.
This prevents people from reducing or avoiding RMDs by emptying their IRA just before the end of the year and then returning the funds the following January. The IRS requires that any outstanding rollovers still count toward your year-end IRA value. Failing to include the correct fair market value could cause you to underpay your RMD, which may result in penalties.
Frequently Asked Questions
Can I roll over a December IRA distribution in January?
Yes. As long as the rollover occurs within 60 days of the original distribution, the transaction remains valid—even if it crosses into the new calendar year.
How do I report a rollover that happens the next year?
You report the distribution and rollover on your tax return for the year you took the original distribution. The 1099-R will reflect the withdrawal, and the 5498 will document the rollover.
Does the one-rollover-per-year rule reset in January?
No. The rule is based on a 12-month period starting from the date of your last distribution that was rolled over. A new calendar year does not reset this limit.
What happens if I take another rollover too soon?
If you complete more than one IRA-to-IRA rollover within a 12-month window, the second transaction may be treated as a taxable distribution and could be subject to penalties.
Will my rollover impact next year’s RMD?
Yes. Even if you roll the funds back in the following year, the original distribution still counts toward the fair market value used to calculate your RMD for that next year.
Plan With Timing in Mind
Cross-year rollovers can trip up even experienced investors.
Schedule a complimentary consultation with a licensed advisor to ensure your rollover is tax-compliant.
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.