History

• In 2010, a federal law eliminated the $100,000 modified adjusted gross income (MAGI) cap on Roth IRA rollovers. In March 2010, the Wisconsin Legislature passed a law that eliminated state restrictions on rollovers.
  
  

No Penalties

• Before the new rules took effect in Wisconsin, people who earned more than $100,000 were subject to a state tax penalty of up to 5.3 percent the year they made a Roth IRA rollover, and 2 percent each year after that.
  
  

Effects

• Although the law was passed in March 2010, it was retroactive to Jan. 1, 2010. Those who filed their Wisconsin state taxes before the deadline are therefore allowed to retract the penalty adjustment.
  
  

Military Differential Pay

• The Wisconsin law also allows military differential pay to be treated as earned income, which the federal government has allowed since 2008. Because it is earned, service members may contribute it to a Roth IRA.
  
  

Reservist Distributions

• Wisconsin law also allows military reservists to take penalty-free distributions from their IRAs, even if they are not yet 59 1/2, and pay the money back within two years following active duty. The federal government has allowed this since 2006.