On the face of it, the 2010 Roth IRA conversion rule changes seem relatively minor.
But as you'll soon see, a minor change can have enormous consequences. In fact, as a result of the 2010 rule changes, anyone (regardless of income) will be able to...
1) Convert to a Roth, and/or
2) Effectively contribute to a Roth
Currently, IRS restrictions on personal income hamper the ability of high income earners to convert to, or contribute to, a Roth IRA. But that's all about to change...
So what's this monumental rule change just over the horizon?
It's the elimination of the IRS income restriction on Roth conversions.
AGI Limit For Roth IRA Conversions
Under current law, you're only eligible for a conversion if your adjustable gross income (AGI) is $100,000 or less. If you happen to earn more than $100,000 per year, you can NOT perform a conversion.
However, starting in 2010, the $100,000 AGI limit disappears.
That's right. It simply disappears!
Now, keep in mind that Congress can change its mind and reinstitute the $100,000 AGI limit at any time. But as of this moment, it hasn't given any indication it will do so.
As a result, anyone (regardless of income) can perform a Roth conversion starting in January 2010.
For instance, let's say you have a Traditional IRA, and you earn $152,000 per year. In 2009, you can NOT convert your Traditional IRA because your AGI exceeds $100,000. But in 2010, you CAN convert your Traditional IRA to a Roth because the AGI limit goes away!
But the implications of the 2010 rule change go far beyond your ability to perform a simple conversion. The rule change actually impacts your ability to contribute to a Roth if you earn above the current limits for making a contribution...
Current Roth IRA Income Restrictions
Under current law, the IRS restricts Roth IRA contribution eligibility to those who have income that falls within a predetermined range.
For instance, in the year 2009, the IRS limits for making a Roth IRA contribution are...
* $176,000 if you're married filing a joint tax return.
* $10,000 if you're married filing a separate tax return and lived with your spouse for any part of the tax year.
* $120,000 if you're single, head of household, or married filing separately and did not live with your spouse for any part of the tax year.
Under current law, if you earn more than the limit established for an individual with your tax filing status, you're not eligible to contribute a single penny to your Roth.
And while the limits change from year to year, the Roth IRA income limit restricting who can or cannot contribute will NOT disappear in 2010.
However, in effect, the Roth IRA income contribution limits do disappear...
To find out how, read more about the 2010 Roth IRA conversion rules by visiting Britt Gillette's website, Your Roth IRA, a site focused exclusively on helping people with self-directed Roth IRAs.
Article Source: http://EzineArticles.com/?expert=Britt_Gillette
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