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Conversion Eligibility

Find out if you're allowed to convert to a Roth IRA

Are you eligible to convert your traditional IRA to a Roth IRA? Here are the main points:

• For years before 2010, if your filing status is married filing separately, you don't qualify unless you lived apart from your spouse for the entire year.
• For years before 2010, if your modified adjusted gross income is greater than $100,000, you can't convert a traditional IRA to a Roth IRA.
• For years before 2008, direct conversions from an employer plan to a Roth IRA were not permitted. You can do that now, but in some situations it may be preferable to roll to a traditional IRA and then convert to a Roth IRA.
• If you inherited a traditional IRA from a person other than your spouse, you can't convert it to a Roth IRA.
• You can convert a traditional IRA to a Roth IRA even if you made a rollover within the previous 12 months.
• If you're otherwise eligible, you can convert part of a traditional IRA to a Roth IRA. But you can't convert only the nontaxable part.

Details concerning each of these points are provided below.

Filing Status

For years before 2010, you generally can't convert a traditional IRA to a Roth IRA if your filing status is married filing separately. There is an exception, though: if you live apart from your spouse for the entire year, you can file a separate return and still be eligible for a conversion if you meet the other requirements.

Change in the law: Beginning in 2010 the rule against conversions by people who are married filing separately no longer applies.

Modified Adjusted Gross Income

For years before 2010, you can't convert a traditional IRA to a Roth IRA in a year when your modified adjusted gross income is greater than $100,000. The term modified adjusted gross income refers to your income after certain deductions (but not all) are allowed, modified to add back certain items that are excluded from income. See IRAs and Modified AGI.

Q: How does this limit work for married couples?

A: The limit is the same for married couples as for single individuals. If you are married filing jointly, your joint modified adjusted gross income must not exceed $100,000 in the year you roll to a Roth IRA.

Q: What if I make a conversion early in the year but end up exceeding the limit because of unexpectedly large income?

A: You should be able to avoid a penalty if you take corrective action by your return due date (including extensions).

Q: What if I exceed the $100,000 limit during some later year?

A: No problem. The limit only applies to the year of the conversion.

Change in the law: Beginning in 2010 the $100,000 limit no longer applies. See Conversion Rule Changes.

Accounts eligible for conversion

For years before 2008, the only thing you could convert to a Roth IRA was a traditional IRA (including a SEP IRA). You couldn't convert directly from a 401k or other employer plan to a Roth IRA. If you were eligible to roll a distribution from an employer plan to a traditional IRA, and also eligible for a conversion from a traditional IRA to a Roth IRA, you could accomplish your goal in two steps: first roll to a traditional IRA, then convert to the Roth IRA. But a direct rollover from an employer plan to a Roth IRA wasn't permitted.

A direct conversion from an employer plan to a Roth IRA is permitted beginning in 2008, but only in circumstances where you would be eligible for both steps in the two-step conversion just described (a rollover to a traditional IRA followed by a conversion of that IRA to a Roth).

Q: What about a SIMPLE IRA?

A: A SIMPLE IRA can be converted to a Roth IRA, but only after you've participated in a SIMPLE IRA Plan for the employer maintaining that plan for at least two years. Before that, the only rollover permitted for your SIMPLE IRA is to another SIMPLE IRA.

Roll what you received

If the rollover distribution from your traditional IRA was entirely in cash, then your rollover contribution to your Roth IRA must also be in cash. You don't have to show that it's the same cash, but you're not allowed to use the cash to buy property and then roll the property into the Roth IRA.

If you received a property distribution from your traditional IRA, then you must roll exactly the same property to your Roth IRA — or cash proceeds from the sale of that property. A rollover or conversion is the only time you're allowed to contribute property to a Roth IRA.

Inherited IRAs

Conversions are not permitted for an IRA you inherit from a person other than your spouse. Guidance issued by the IRS in March 2008 seemed to indicate these conversions would be permitted, but a technical corrections law passed in December 2008 clarified they are not permitted.

When you inherit a traditional IRA from your spouse you're permitted to elect to treat this IRA as your own. If you make this election, you can convert the IRA to a Roth IRA if you meet the other requirements described on this page.

Rollover within 12 months

Normally you aren't allowed to do more than one rollover from or to the same IRA within a 12-month period. This rule applies to Roth IRAs, too, but with a special exception. For purposes of this rule you're permitted to disregard a conversion from a traditional IRA to a Roth IRA, even if the conversion takes the form of a rollover.

Example: In November, 2007, you took a distribution from your traditional IRA and rolled it to a different traditional IRA within 60 days. In March, 2008 you want to roll this traditional IRA to a Roth IRA. This rollover is permitted if you meet the other requirements for a rollover.

Rolling part of your IRA

There's no rule that says you have to convert your entire IRA at once. You can convert part of an IRA if you choose. Unfortunately though, you can't choose to roll only the nontaxable part of a traditional IRA that contains taxable and nontaxable money.

Example: You have a traditional IRA with a balance of $10,000, which includes $6,000 of nondeductible contributions. If you roll $6,000 of this IRA to a Roth IRA, you're required to treat that rollover as coming 60% from nondeductible contributions and 40% from other money — the part that's taxable.