26 U.S.C. § 408A — Roth IRAs

(a) General rule
A Roth IRA is treated the same as a regular individual retirement plan^* for tax purposes, except where this section says otherwise.

(b) Roth IRA
A "Roth IRA" is an individual retirement plan that is designated as a Roth IRA when it's set up, in whatever manner the Secretary^* prescribes.

(c) Treatment of contributions
(1) No deduction allowed: You can't deduct Roth IRA contributions on your taxes.
(2) Contribution limit: Each year, your total contributions to all your Roth IRAs can't exceed the maximum amount you could otherwise deduct for a regular IRA, minus whatever you contributed that year to other (non-Roth) IRAs.
(3) Limits based on income:
(A) Dollar limit — walk through the math: Start with the limit from paragraph (2)(A). Find the excess of your adjusted gross income over the "applicable dollar amount" described below. Divide that excess by $15,000 (or $10,000 if you're married filing separately). Multiply that ratio by the paragraph (2)(A) limit. Subtract the result from that limit — but never go below zero. That's your reduced contribution limit.
(B) Definitions: for this calculation, "adjusted gross income" is figured the normal way, except any income from converting another IRA to a Roth IRA isn't counted. The "applicable dollar amount" is $150,000 for joint filers, $95,000 for everyone else, and $0 for a married person filing separately.
(C) Marital status follows the same rule used for regular IRA deduction limits.
(D) Inflation adjustment: for tax years after 2006, the $150,000 and $95,000 thresholds go up each year by a cost-of-living adjustment, rounded to the nearest $1,000.
(E) A special boost applies for money rolled over from a 529 college savings plan: your allowed contribution amount goes up by the smaller of the rollover amount, or however much your limit was reduced under subparagraph (A).
(4) You don't have to take required minimum distributions from a Roth IRA before death — the usual rules requiring that (and the incidental-death-benefit rules) don't apply.
(5) Rollover contributions: Only a "qualified rollover contribution" (defined in subsection (e)) can go into a Roth IRA. A qualified rollover doesn't count against your contribution limit in paragraph (2) — except that rollovers from a 529 plan are handled under a different rule.
(6) Contributions are timed under the same rule used for regular IRAs.

(d) Distribution rules
(1) A "qualified distribution" from a Roth IRA isn't included in your taxable income.
(2) A distribution counts as "qualified" if it's paid:
(i) on or after you turn 59½;
(ii) to a beneficiary or your estate, on or after your death;
(iii) because you're disabled; or
(iv) as a "qualified special purpose distribution" (defined in paragraph (5)).
But a distribution is never "qualified" if it's paid within the five tax years starting with the first year you (or your spouse, or your employer through a SIMPLE plan or SEP) made a Roth contribution for that account. It's also never "qualified" if it's a return of an excess contribution and its earnings.

(3) Rollovers from another retirement plan into a Roth IRA (conversions):
(A) When you convert money from another retirement plan into a Roth IRA, the normal tax-free-rollover rules don't apply — you must include the converted amount in your taxable income — but the extra 10% early-withdrawal tax doesn't apply either. For a rollover made in 2010, unless you elected otherwise, the income was spread evenly over your 2011 and 2012 tax years.
(B) This rule applies to a rollover from an eligible retirement plan into a Roth IRA. It doesn't apply to a rollover between two Roth accounts.
(C) Converting a non-Roth IRA to a Roth IRA counts as this kind of taxable rollover.
(D) Trustees of Roth IRAs and other retirement plans must report enough information to make sure the taxable amount actually gets included in income.
(E) For a 2010 rollover where the tax was spread over two years: if you withdraw money from the Roth IRA before all of that income is reported, part of the early withdrawal can speed up how much you must report that year — though never more than the total still owed. If you die before it's all reported, the remaining amount is included in your income for the year you die — unless your surviving spouse inherits the whole account and elects to keep reporting it on the original schedule instead.
(F) If you withdraw money within five years of a rollover, and it's traced to the taxable part of that rollover, the extra 10% early-withdrawal tax applies to that part after all.

(4) Ordering rules for withdrawals: (A) A rule that normally combines all your IRAs for certain purposes is applied separately to Roth IRAs and to other IRAs. (B) Money coming out of a Roth IRA is treated as coming out in this order: first your regular contributions, up to the total you've put in; then your rollover contributions, oldest first — and within a rollover contribution, the taxable part comes out before the rest.

(5) A "qualified special purpose distribution" is a distribution covered by the specific exception described in section 72(t)(2)(F).

(6) Fixing a mistake before the tax deadline: if, by your return's due date, you transfer a contribution — along with its earnings — from one IRA to another, it's treated as if it had been made to the second plan all along. This doesn't apply to the earnings-only part without the contribution, only applies if no deduction was taken on the original contribution, and doesn't apply to a Roth conversion.

(7) "Due date" means your tax return's filing deadline, including any extensions.

(e) Qualified rollover contribution
(1) In general, this means a rollover into a Roth IRA that comes from another Roth IRA, or from an eligible retirement plan that meets the normal rollover requirements, or (to the extent allowed) from a 529 college savings plan. A rollover from a non-Roth IRA to a Roth IRA isn't counted against the usual one-rollover-per-year limit on ordinary IRA-to-IRA rollovers.
(2) Military death gratuity: if you receive a military death-gratuity payment, you can roll it into a Roth IRA within one year of receiving it, up to the amount received minus whatever part you put into a Coverdell education savings account. The usual limit on how many rollovers you can do doesn't apply to this kind of rollover.
(3) SIMPLE retirement accounts: a payout from a SIMPLE retirement account^* only counts as a "qualified rollover contribution" if it goes into another SIMPLE account, and only once the account has been open at least two years under the applicable election and early-withdrawal-tax rules.