Many of us are well aware of the income limitations on Roth IRAs being lifted in 2010. But are you aware that the personal exemptions income phase out is also being lifted?

A personal exemption is the amount excluded from taxable income, given to any taxpayer who cannot be claimed by another taxpayer. The personal exemption was initially used to help make sure the poor paid little income taxes. With inflation and increasing incomes, the initial $3,000 exemption, now $3,650, has become less of a player in the tax world. This became even more evident when in 1990, policy makers began phasing out the personal exemption for higher income earners. In 2010, that income limit is being removed entirely, only to return in 2011. What can high income earners do to take advantage of this opportunity? 

Have your tax planner run a tax estimate for 2010 to determine how much taxes your are projected to pay. You may pay less if your income is higher, and you have a large family with say, three or four children to claim. Knowing that your estimates may be less, you can use extra estimate payments towards Roth conversion tax, or lower your estimates on purpose to increase cash flow now.

Remember that the personal exemption income limitation is only in effect for 2010. Once you have run these calculations, you will have a better idea as to what you can expect for your tax bill.