General rules include the termination of income requirements after 2009 as well as marital filing status requirements. You can convert any amount you are willing to pay the taxes on.

The default provision is that 2010 conversions result in deferral of tax by reporting 50% of the income in 2011 and 50% in 2012. Taxpayer can opt to report the entire conversion in 2010, and that is useful in certain situations including taxpayers who are converting smaller incremental amounts each year. For 2010 conversions, the above decision cannot be different for different conversions done that year. Recharacterization deadline is still 10/15/2011 for 2010 conversions, therefore taxpayers will not have the benefit of the full retroactive picture of their tax liabilities for 2011 and 2012.

Note that taxes on conversions are based on the portion of basis per Form 8606 and includes ALL traditional, SEP and SIMPLE IRA accounts owned. You cannot simply convert an IRA that you made the non deductible contributions to and include a lower portion subject to tax. No matter which IRA account used to fund the conversion, the taxable % will be the same.

The idea of converting tax free is only viable to those who had no rollover IRAs or prior IRA accounts and made non deductible contributions with little or no gains on those contributions. Only those taxpayers would have mostly tax free conversions in 2010.

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