Roth MAGI contribution limitation 2010?
I was at a Bar Assoc. meeting on Oct. 2nd, and as I understood, it was explained that not only would the Roth conversion limit be elimited in 2010 but also the ROTH contribution MAGI limit.
Is the ROTH contribution MAGI limit being eliminated also?
If not-do investors need to do the 2 step process of $6,000 to a non-deductible IRA then a day later convert to the ROTH?
Is this what Congress intended?
Permalink Submitted by Alan Spross on Thu, 2009-10-08 21:44
No, the Roth regular contribution MAGI limits are not being eliminated. There probably will not even be an inflation adjustment for 2010 over 2009 since inflation is so low over the past year.
Therefore, if taxpayer cannot qualify for a regular Roth contribution, they can still convert as much as they wish starting in 2010. Making a non deductible TIRA contribution can be done without a maximum income limit, and then a Roth conversion can be done. However, the pro rate rules apply to taxation of that conversion, so if the investor has rollover IRAs or other pre tax amounts in IRAs, the 6,000 in non deductible contributions is not going to reduce the taxable portion of a conversion by much. If the non deductible contribution is their ONLY TIRA, then the conversion will be tax free if done immediately.
With respect to intent, hard to say, but several pundits look at this inconsistency and think that it might be changed in the future. If not, then the work around of making a non deductible contribution and then converting it could be restricted. For now though, the non deductible contribution works well for those who have no other TIRA assets and cannot make regular Roth contributions.
Permalink Submitted by Heidi Davis on Thu, 2009-10-08 22:29
Thanks, Alan That was very helpful! I really appreciate your time in passing on your knowledge.
Heidi Davis