Why the Once-Per-Year Rollover Rule is Often Misapplied
The IRS rollover rules are fraught with complexity. (That’s why we always recommend direct transfers instead of 60-day rollovers.) The rule with the most serious consequences is the “once-per-year” rule. Running afoul of that rule triggers a taxable distribution and often a 10% early distribution penalty if you’re under age 59½. And, any rolled-over funds included in the “illegal” rollover are considered an excess contribution subject to an annual 6% penalty unless timely corrected. To make matters worse, unlike missing the 60-day deadline, a mistake with the one-rollover-per-year rule cannot be waived by the IRS or corrected.
The once-per-year rule applies to traditional IRA-to-traditional IRA rollovers and Roth IRA-to-Roth IRA rollovers. It doesn’t apply to company plan-to-IRA rollovers, IRA-to-company plan rollovers, or traditional IRA-to-Roth IRA rollovers (Roth conversions). Since 2015, the once-per-year rule has applied to all of a person’s IRAs – not to each IRA account separately. Traditional and Roth IRA rollovers are combined when applying the rule.
The easy way to explain the rule is to say that you can’t do more than one IRA-to-IRA (or Roth IRA-to-Roth IRA) rollover in any one-year (365-day) period. But that’s not always accurate. A more accurate explanation is to say you can’t do a 60-day rollover of more than one distribution received during any one-year period.
Here’s a few examples that illustrate the difference:
Example 1: Traditional IRA Distributions
Liam received a traditional IRA distribution on July 1, 2025 that he rolled over to another traditional IRA on August 1, 2025. If Liam receives a second traditional IRA (or Roth IRA) distribution any time before July 1, 2026, the once-per-year rule prevents him from doing another 60-day rollover of that second distribution to another like IRA.
Example 2: Second Distribution Within One Year
Let’s say Liam receives the second distribution on June 15, 2026 (within one year of the first distribution on July 1, 2025). He would still violate the once-per-year rule even if he delays rolling over the second distribution until August 2, 2026 (more than one year after the first rollover done on August 1, 2025).
Example 3: Second Distribution After One Year
Now assume that Liam receives the second distribution on July 10, 2026 (more than one year after the first distribution on July 1, 2025). He would not violate the once-per-year rule even if he rolls over the second distribution on July 25, 2026 (within one year of the first rollover done on August 1, 2025). This is an example of when doing two rollovers within a one-year period (on August 1, 2025 and July 25, 2026) is perfectly acceptable.
The bottom line is that, in applying the once-per-year rule, look at the timing of the distributions being rolled over – not at the timing of the rollovers.
By Ian Berger, JD
IRA Analyst
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.