Children of Soldiers Fund

Considerable attention has been paid to the window opening for Roth IRA conversions in 2010. Scheduled in a tax law enacted in May 2006, the rules on conversions will be opening up next month. Popular inquiry on the topic has increased. This article will address many of the opportunities and problems raised by expanded Roth IRA conversion options. First let’s define the mechanics of a Roth IRA conversion. An investor may convert some or all of his traditional IRA accounts, SEP-IRAs, 401ks, or 403b balances to a Roth IRA. These source accounts are tax-deferred. Ordinary income tax must be paid on any pre tax assets that are transferred. Once transferred, however, the gains on investments in the target Roth IRA account are free of tax. Someone undertaking a Roth IRA conversion is thus electing to pay taxes now in exchange for a tax holiday in the future.Key Parts to the New LawThere are two key elements to changes in the law regarding Roth IRAs in 2010. The first is that eligibility to do a Roth IRA conversion will no longer be means tested. Income limits on conversion are permanently repealed. Since