Financial Planning for Generation X & Y Women
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Expert Q&A Archive

Will there be a possibility in the future to convert traditional IRAs to Roth IRAs without being penalized?
I have heard some talk that there may be a timeframe either in 2009 or 2010 where you could convert a traditional IRA over to a Roth IRA without penalty. Has that happened or will that happen? What is the income limit?
Rosemary Ervin, CPA:
expert info »
In 2010 there is no income limitation on the conversion of a regular IRA to a Roth IRA, according to current legislation. Be aware that the amount to be included in gross income on the conversion will be reported ratably in 2011 & 2012. That means that the conversion is made in 2010 and the income is reported 50% in 2011 and 50% in 2012. If you have basis in your IRA (you contributions were nondeductible, see Form 8606) then you only report that portion of your IRA for which you do not have basis. Absent Form 8606, the entire amount is includible in income over the two year period.
Michael A. Masiello:
expert info »
The year is 2010. It is not a tax-free conversion, but they are making it available without income
restriction, and you can stretch the tax over 2 yrs.
Rachel Lane, CFP:
expert info »
Starting in 2010, taxpayers with modified adjusted gross income of more than $100,000 will be allowed to convert a traditional IRA to a Roth IRA. This change applies for one year only - 2010 - and the income taxes due on conversions can be spread over two years. So the 2010 conversion amount may be included as taxable income in 2011 and 2012, helping to spread out the tax bite. Conversions in subsequent years are included in income during the tax year in which the conversion is completed.

Removing the Roth IRA conversion cap, however, doesn't mean anyone can fund a Roth IRA, but it does mean that anyone can convert an existing IRA to a Roth IRA.
Alyssa Rakovich:
expert info »
You can convert traditional IRAs to Roth IRAs without penalties, but you will be subject to ordinary income tax on the amount you convert. Partial conversions are allowed.