2010 is the year when those with significant amounts in their traditional IRAs can convert and reap the tax-free growth benefits of a Roth IRA - regardless of their income level. Previously, you had to have a modified adjusted gross income (MAGI) of $100,000 or less to be eligible to convert.
There is, however, one stipulation for higher-income taxpayers - they still can't contribute to a Roth IRA. So, they won't be able to make additional contributions after the conversion unless either their economic situation or tax law changes. For 2010, the ability to contribute to a Roth IRA begins to phase out at a MAGI of $105,000 for single filers or heads of households ($167,000 for joint filers). This ability to contribute is eliminated after MAGI hits $120,000 for single filers and heads of households ($177,000 for joint filers).
Be aware that any conversion you make is subject to income tax, but for conversions made in 2010 you may report the income in two equal installments in 2011 and 2012. Thus, you'll be able to defer half of the income to 2011 and the other half to 2012. And if you're converting nondeductible contributions, you'll be liable for tax only on the account earnings. Also keep in mind that Roth IRA assets must remain in the account for at least five years and you must be at least 59 1/2 before you can withdraw earnings without incurring income tax liability and early withdrawal penalties.