The IRA rollover 12-month rule limits you to one indirect rollover between IRAs in any one-year period, counted across every IRA you own rather than per account. Take a distribution from any IRA, redeposit it into an IRA yourself, and you cannot do that again with any of your IRAs until a full year has passed from the date you received the first distribution. Break the rule and the second rollover loses its tax-free status, becomes an excess contribution in the receiving account, and starts accruing penalties that keep growing until you fix them.
How the One-Per-Year Rule Works
An indirect rollover is one where your custodian sends you the money and you personally deposit it into another IRA within 60 calendar days. Make the deadline and the distribution is tax-free. Miss it and the entire amount counts as taxable income for the year.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
The one-per-year limit sits in Section 408(d)(3)(B) of the Internal Revenue Code. The statute blocks you from excluding a distribution from income as a rollover if, at any time during the one-year period ending on the day you received that distribution, you already received another IRA distribution that you rolled over tax-free.2Office of the Law Revision Counsel. 26 U.S. Code 408 – Individual Retirement Accounts Once you complete an indirect rollover, wait more than one year from the date you received that distribution before taking another IRA distribution you intend to roll over.
The clock runs from the date of distribution, not the date of redeposit. It is also not a calendar year rule. Two indirect rollovers in the same year are fine if they sit more than twelve months apart; two rollovers eleven months apart are a violation even if they fall on either side of January 1.
The Rule Applies to You, Not to Each Account
This is where people get caught. The limit is not per IRA. It applies to you as a person, across every IRA you own. Complete an indirect rollover from your Traditional IRA and you cannot do another indirect rollover from your Roth IRA, SEP IRA, or SIMPLE IRA until the one-year window closes.
The IRS confirmed the aggregate approach in Announcement 2014-32, effective for distributions on or after January 1, 2015. A rollover between your Roth IRAs blocks a separate rollover between your Traditional IRAs during the same one-year period, and vice versa. For this rule, “Traditional IRA” includes SEP IRAs and SIMPLE IRAs.3Internal Revenue Service. Announcement 2014-32 – Application of One-Per-Year Limit on IRA Rollovers Before 2015 the IRS applied the limit account by account, which is what older guidance and older articles sometimes still describe.
Transfers That Don’t Count Against the Limit
Most retirement money movements aren’t affected by this rule at all. If you use any of the methods below, the one-per-year clock is not touched.
Trustee-to-Trustee Transfers
When one custodian sends the funds directly to another custodian and you never touch the money, that’s a direct transfer. You can do unlimited direct transfers in a year between any combination of IRAs. The IRS does not treat these as distributions, so the one-per-year rule never applies. Consolidating IRAs or switching brokerages? Always ask for a direct transfer.
Rollovers From Employer Plans to IRAs
Moving money from a 401(k), 403(b), or governmental 457(b) plan into an IRA is exempt, even when you receive the check and redeposit it yourself. The limitation applies only to IRA-to-IRA rollovers.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions You could roll a 401(k) to an IRA and complete a separate IRA-to-IRA indirect rollover in the same month without conflict.
Roth Conversions
Converting a Traditional IRA to a Roth IRA is a taxable event, not a rollover for purposes of this rule. Conversions are specifically excluded from the one-per-year limit.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions Convert as many times as you want in a year without affecting your ability to do an indirect rollover.
Rollovers Between Employer Plans
Moving funds from one 401(k) to another 401(k), or from a 403(b) into a 401(k), falls outside the IRA rollover rule entirely. The 12-month restriction governs only IRA-to-IRA movement through the account holder’s hands.
What Happens If You Violate the Rule
A second indirect IRA rollover inside the one-year window creates two separate tax problems at the same time.
First, the second distribution loses its tax-free treatment. The full amount is added to your taxable income at ordinary rates. If you’re younger than 59½, you also owe a 10% additional tax on the portion included in gross income.4Office of the Law Revision Counsel. 26 U.S. Code 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts On a $50,000 distribution, someone in the 22% bracket under age 59½ would owe roughly $11,000 in income tax and $5,000 in early withdrawal penalty.
Second, the money you deposited into the receiving IRA is no longer a valid rollover, so it sits there as an excess contribution. Excess contributions carry a 6% excise tax for each year they remain in the account.5Office of the Law Revision Counsel. 26 U.S. Code 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities It is not a one-time hit. It recurs annually until the excess comes out.
To stop it, withdraw the excess amount plus any earnings it generated. The IRS provides Worksheet 1-4 in Publication 590-A for calculating the attributable earnings. Correct the excess before your tax filing deadline, including extensions, and you avoid the 6% penalty for that year. Wait longer and you’ll owe 6% for every year the excess sat in the account. Both the 10% early withdrawal tax and the 6% excise tax are reported on Form 5329.6Internal Revenue Service. About Form 5329, Additional Taxes on Qualified Plans
The Withholding Problem on Indirect Rollovers
Even when you stay within the 12-month rule, indirect rollovers create a cash-flow trap worth knowing about. Your custodian withholds 10% for federal taxes on an IRA distribution unless you elect out. For a distribution from an employer plan such as a 401(k), the withholding is a mandatory 20% you cannot opt out of.1Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
To roll the distribution over tax-free, you must deposit the full original amount within 60 days. If the custodian withheld $2,000 from a $10,000 distribution, you received $8,000 but need to deposit $10,000. The missing $2,000 has to come from your own funds. Deposit only what you received and the IRS treats the shortfall as a taxable distribution, with the 10% early withdrawal penalty added if you’re under 59½. You recover the withheld amount as a credit when you file, but you need the cash on hand during the 60-day window.
SIMPLE IRAs Have an Extra Restriction
SIMPLE IRAs carry a separate limit that sits alongside the 12-month rule. During the first two years after you begin participating in your employer’s SIMPLE IRA plan, you can only transfer those funds to another SIMPLE IRA. Rolling the money into a Traditional IRA, Roth IRA, or 401(k) inside that two-year window makes the distribution taxable and pushes the early withdrawal penalty from 10% to 25%.7Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules After two years, SIMPLE IRA funds can be rolled to any eligible retirement account under the normal rules, including the one-per-year limit.