2010 Roth Ira Conversions – The Tax Loophole Anyone Can Take Advantage Of

The tax code tends to be fairly static, which means the possible tax saving strategies are fairly well known. 2010 has turned this concept on its head. The last year of the Bush Tax Cuts has introduced a huge new variable to the equation and the ability to do a Roth IRA conversion without all the usually restrictions and penalties constitutes a massive tax loophole anyone can use.

The Roth IRA is one of the retirement vehicles of choice these days. Why? Simple – tax rates. The last eight years have been great from a tax perspective. Rates have been at historical lows. The ballooning national debt, costly wars, Social Security and Medicare deficits as well as a reduction in tax revenues are all leading to a future with much higher tax rates. States have already been cranking up rates in 2010 and the feds will be getting in on the act in 2011.

So, why does this make the Roth IRA a good choice? The money you save in it is distributed tax free when you retire. Since tax rates are going to be much higher in the future, it makes sense to stuff as much money into a Roth IRA as you possible can and this brings us to the topic of the 2010 Roth IRA conversion.

The Roth has usually come with serious restrictions on income earned and contributions. This keeps many people from taking advantage of it for retirement planning. Well, that is all changed in 2010. There are no restrictions on income. Whether you earn $50,000 a year or $5,000,000, you can convert to and use a Roth IRA. Even better, you don’t have to pay any penalties when you close out your retirement accounts to make the switch.

There is a problem, however. You do have to pay income tax on the distributions from your old accounts. That can be a not inconsiderable amount of money. In another tax tidbit from the gods, you have the choice to spread the tax hit over two years to lessen the burden, a step most people are taking.

Who should take advantage of the 2010 Roth IRA conversion option? Just about everyone. This is a one time tax loophole that is presents a huge legal tax dodge. Make sure to speak with a Roth IRA conversion expert to learn how you can save a bundle by taking the step.

By: Barry Milton

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Barry Milton provides 2010 Roth conversion services for clients via UFCAmerica.com.