Dec 24

Money you withdraw from your IRA account are counted as income. If you have regular savings set aside, you don’t necessarily need to spend the IRA withdrawal, so you put it into Roth IRA to let it grow tax-free. How much can you convert regular IRA money to Roth IRA money each year? Is this capped by the Roth IRA contribution rule?


3 comments so far...

  • smh60437 Said on December 24th, 2009 at 2:51 pm:

    The amount you convert from regular IRA to Roth IRA is not capped. Whether you can do it or not is determined by your modified adjusted gross income. (Gross income without respect to amount of IRA to Roth rollover). The AGI limit is 100,000. In other words if you make less than 100K you can roll over as much of your IRA as you wish.

    In 2010 the AGI limit goes away and you are free to roll over the IRA to a Roth if your AGI precludes you now.

    NOTE THAT THIS IS A TAXABLE TRANSACTION AND YOU SHOULD MAKE SURE THAT THE FUNDS GO FROM BROKER TO BROKER. BE CAREFUL THERE ARE TAX TRAPS IF YOU GET A CHECK. The traps can be overcome but it is a pain in the butt!

  • ninasgramma Said on December 24th, 2009 at 3:12 pm:

    If you are planning to convert a traditional IRA to a Roth, do not take a withdrawal from your traditional IRA. Do a “trusteee to trustee” conversion. This means, pick the financial institution that you want your Roth to go into, and fill out their paperwork to do the conversion. You can convert up to your entire traditional IRA into a Roth, there is no dollar limit on the amount that can be converted.

    If you do take a withdrawal of your traditional IRA, you have only 60 days to re-invest that money into another IRA (Roth or traditional), or you will be taxed on the amount withdrawn (and pay a penalty if you are under 59.5).

    The income limits for contributions and conversions are different. The traditional to Roth conversion is allowed only if your adjusted gross income is under $100,000. However, in 2010, this income limit is eliminated and anyone with a traditional IRA will be able to convert to a Roth.

  • r_kav Said on December 24th, 2009 at 3:20 pm:

    If you are age 70 1/2 or over, and therefore taking Required Minimum Distributions from your IRA, you cannot convert this money to a ROTH.

  • EASchensky Said on January 19th, 2010 at 11:47 pm:

    Income limits no longer apply to conversions of regular IRA’s to Roth IRA’s. Thus high incomers can now conve their IRA’s.

  • wrbarefoot Said on February 12th, 2010 at 5:39 am:

    @AICPANews: In 2010 all taxpayers can conve regular IRA to Roth IRA; no income restrictions apply-Tom Ochsenschlager, #AICPA #tax vp.

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