Broker Check

Time Is Running Out For 2010 Roth IRA Conversions

December 2010

There has been a lot of talk and questions this year about converting a traditional IRA to a ROTH IRA. Below are some key points to consider to help determine if you might benefit from a conversion. 

  • In 2010, anyone, regardless of income levels, can do a conversion. This has not been the case previously.
  • 50% of the income from the conversion will be reported in 2011 and the remaining 50% in 2012.
  • Consider your present and future tax liabilities and brackets.
  • Consider how you will pay for or offset the tax liability from the conversion.
  • Consider when you will need to use the money in the account.
  • What are your state tax laws for conversions, which may differ from federal rules.
  • Did you make any non-deductible contributions to your IRA? If so, then the conversion on those amounts will be tax-free.
  • Are you filing for financial aid for yourself or any dependents?
  • If you’re taking Social Security or paying for Medicare B, the conversion might impact your taxes on your Social Security income or your premiums on Medicare B.

Please call me if you would like to discuss in more detail if a conversion might be right for you.

Thank You