- Congress devised the traditional IRA for workers not covered by employer retirement plans. If a workplace plan covers you or your spouse, the IRS may eliminate or reduce the amount of traditional IRA contributions you can deduct from your taxable income on the basis of how much money you make. In 2010, if you participated in a workplace plan, the IRS began reducing allowable traditional IRA deductions for joint filers whose modified adjusted gross income (AGI) was more than $89,000 but less than $109,000. While these figures remained unchanged from 2009, the IRS raised the range for single and head of household filers from $55,000 to $65,000 in 2009 to $56,000 to $66,000 in 2010. If you did not participate in a workplace plan but your spouse did and you file a joint return, the IRS began phasing out your 2010 deduction if your modified AGI was more than $167,000 but less than $177,000, up $1,000 on both ends from 2009. If you had income over the top end of any of the above-mentioned ranges, the IRS completely eliminated your traditional IRA deduction for that tax year.
- The IRS may reduce the amount of money you can contribute to a Roth IRA on the basis of how much money you make. For 2010, the IRS began phasing out your Roth contribution if you filed a joint return and had a modified AGI of at least $167,000. Once you passed $177,000 in modified AGI, the IRS eliminated your ability to contribute to a Roth. Both of these figures rose $1,000 from 2009. In 2010, the IRS began phasing out Roth contributions for single or head of household filers at $105,000, eliminating them at $120,000.
- In 2010, the IRS removed modified AGI restrictions, allowing all IRA holders to convert to Roth IRAs. If you converted money from an IRA other than a Roth to a Roth IRA, you may be subject to taxes on the conversion amount. For 2010, the IRS allowed taxpayers to spread the taxable amount out over two tax years -- 2011 and 2012. The IRS also gave the option of reporting the income, in its entirety, in 2010.
- Most other IRS rules for IRAs remained the same in 2010. For instance, the IRS still allowed penalty-free premature withdrawals from Roth and traditional IRAs to cover expenses for higher education or a first-time home purchase. The total amount you could invest in an IRA remained at $5,000 -- or $6,000 if you were 50 years of age or older -- for all of your IRAs combined in 2010.
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