Do all states allow tax free provisions of Roth IRA?
After reading numerous articles on the pros and cons of a Roth IRA conversion, I have a question about whether all states allow this conversion and whether after paying federal and state taxes, all funds withdrawn are tax-free. Any insight?
Permalink Submitted by Alan Spross on Tue, 2009-12-22 00:40
The only glitch I have heard of so far is in WI, which has not yet approved conformity with the PPA on 2010 Roth conversions. My guess is that the state will be pressured to allow these conversions, but that does not mean they will also allow the two year income deferral. Since many state houses are in shambles now, some of them that must enact conformity are late doing so, but since Roth conversions generate the instant tax revenue the states are starving to get, it is unlikely that 2010 conversions will be restricted other than to accelerate tax payments as stated above.
There are no states that do not allow regular Roth contributions or conversions under prior tax law, and tax free distributions once the Roth is qualified. But certain conformity legislation may not follow on a timely basis. In specific situations, consult local tax counsel, and remember that a conversion can always be recharcterized if the unlikely conformity does not get approved.