The treatment of IRAs is changing in 2010, and from what I’ve read, the new rules could be a boon for those who like the Roth IRA but find themselves locked out by income limits.
Right now, you’re only able to convert a traditional IRA to a Roth if your adjusted gross income is less than $100,000. However, in 2010, this limit is scheduled to be lifted, and the Roth IRA option will be available to almost anyone with earned income.
By converting to a Roth IRA in 2010, you’ll spread any taxable income created by the conversion evenly across 2011 and 2012, unless you choose to recognize the income in 2010. Keep in mind that when you convert, all pre-tax contributions and earnings will be subject to taxation at ordinary income tax rates.
I believe this means that if you are locked out the Roth IRA for 2009, you can effectively contribute to a Roth by simply contributing to a regular IRA in 2009, not claim it as a deduction, then roll it into a Roth in 2010.
There’s a chance, and talk to your favorite tax/finance professional to make sure, that you could contribute to both the Roth (if you meet the income requirements) and the regular IRA in 2009 and then roll the regular over in 2010 to effectively double the annual contribution limit.
