Roth IRA Conversions
Starting in 2010, individuals are free to convert a traditional IRA to a Roth IRA regardless of their income level. Additionally, filing status restrictions are also lifted, allowing married taxpayers filing separate returns to change from a traditional IRA to a Roth. Conversions are treated as a taxable distribution, taxable as ordinary income at the marginal tax rate. However, Congress has provided a special incentive in 2010 to jump-start Roth conversions. For conversions in 2010, taxpayers can spread the tax due over a two year period. In 2010, individuals will have the choice of recognizing their conversion income in 2010 or averaging it over 2011 and 2012. A word of caution, it is anticipated that the tax rates for 2011 and 2012 will be higher than in 2010 and therefore, proper planning is important to this conversion.
For more information and to discuss how a conversion would impact you, please contact: