For the 2011 tax year there are some changes that have been made regarding Roth IRAs. Below is a summary of those changes.
2011 Income Rules
The 2011 Roth IRA Income Limits have increased $2,000 for both single tax filers and married filing joint filers over the 2010 levels.
In 2011 single filers can fully contribute to a Roth IRA if their modified adjusted gross income (MAGI) falls below $107,000.
For those filing “married filing joint” tax returns full contributions can be made to a Roth IRA if the modified adjusted gross income falls below a combined $169,000.
The contribution limit is phased out after $122,000 for single filers and $179,000 for married filing joint filers. If your income is above these limits you will not be allowed to contribute to a Roth IRA in 2011.
2011 Contribution Limits
The 2011 Roth IRA Contribution Limits remain unchanged from the 2010 limits.
All qualifying individuals may contribute $5,000 to a Roth IRA in 2011. Individuals age 50 or older may also contribute a “catch-up” contribution of $1,000.
2011 Age Rules
There are no changes to the age rules with Roth IRAs for 2011. Anyone with earned income that falls under the income rules may contribute to a Roth IRA regardless of age.
One of the benefits of using a Roth IRA over a Traditional IRA is you will never be forced to take distributions from the account regardless of age. You may begin withdrawing your earnings at age 59 and 1/2 without tax or penalty. Contributions may be withdrawn at any age without tax or penalty.
2011 Conversion Rules
There has been one major change to the 2011 Roth IRA Conversion Rules compared to 2010.
The 2010 tax year was the first year individuals with incomes greater than $100,000 were allowed to convert a Traditional IRA to a Roth IRA. This was a major change in Roth IRA rules.
Additionally the tax increase incurred from converting to a Roth IRA could be spread over the following two tax years (2011 and 2012).
The income cap is removed in 2011 just as it was in 2010. However, there is one significant change to the conversion rules in 2011. The tax incurred from converting to a Roth IRA in 2011 must be paid on your 2011 taxes.