Converting Traditional IRAs to Roth IRAs in 2010

Nate Ward, CPA, CFP®

Beginning in 2010, a significant tax planning opportunity may arise for those who have traditional IRA accounts. Depending on your individual circumstances, you may or may not have been able to take advantage of converting your traditional IRA to a Roth IRA prior to 2010 due to the $100,000 adjusted gross income (AGI) limitation or the filing status limitation. As a result of the Tax Increase Prevention & Reconciliation Act of 2005 (TIPRA), in 2010, the $100,000 AGI limitation and the filing status limitation no longer apply; therefore, allowing anyone the ability to convert their existing traditional IRA to a Roth IRA regardless of income level.

Two of the most significant advantages of Roth IRAs are that the appreciation grows tax free and there are no required minimum distributions (RMDs). These advantages can play an important role in retirement and estate planning.