For the first time, beginning in January 2010, taxpayers with adjusted gross incomes of more than $100,000 will be allowed to convert a traditional IRA to a Roth IRA. In the past, taxpayers with higher incomes were excluded from this possibility.
Roth IRAs allow non-deductible contributions to grow and be distributed tax free if certain requirements are met. An advantage to converting in 2010 is that you have the choice of either reporting the taxable income in 2010 or delaying the tax payment and reporting the taxable income equally in 2011 and 2012. Conversions in 2011 and beyond will require you to report the tax for the year of conversion.
Converting to a Roth IRA may be advantageous to you, as well as your beneficiaries, but there are tax implications and many other factors to consider. As with all tax-related decisions, consult with your tax and legal advisor to see if a Roth IRA makes sense for you.
