taxes

'Goofy' change coming to Roth IRA

Don Taylorq_v2.gifDear Dr. Don,
I have a question regarding a previous column, "2010 tax change ends Roth IRA worries."

In this column, you originally stated the following: Thanks to a change in the tax code, in 2010, the income restrictions are eliminated and you'll no longer have to worry about whether or not you qualify to make a contribution to a Roth IRA account.

Are the adjusted gross income restrictions removed for new contributions to a Roth IRA, or are the rollover restrictions removed? Your statement alludes to the fact that new contributions are not income-tested; however, I cannot find any documentation regarding your comment. I can only find documentation regarding rolling over from traditional to Roth IRAs.

Can you please clarify your statement so I can determine what action I need to take with my IRA?
-- Dave Declares

a_v2.gifDear Dave,
I got a little enthusiastic in that earlier column. As you point out, the removal of AGI restrictions deals with Roth IRA conversions, not contributions to a Roth IRA.

It's a little goofy when you think about it. Starting in 2010, you can contribute after-tax dollars to a traditional IRA, then convert the traditional IRA into a Roth IRA without worrying about your adjusted gross income. However, you still have to worry about income restrictions when contributing directly into a Roth IRA.

I've learned my lesson. I'll leave the tax talk to George Saenz and Kay Bell, Bankrate's tax experts. George's column "Roth IRA income limits" explains what's coming in 2010. You can also find more information in the Bankrate feature "7 steps to a 2010 Roth IRA conversion." Contact a tax professional if you need additional information.

Read more Dr. Don columns for additional personal finance advice.

To ask a question of Dr. Don, go to the "Ask the Experts" page, and select one of these topics: "Financing a home," "Saving & investing" or "Money."

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