As of January 1 the income limit for Roth IRA conversions disappeared, and married couples who file their returns separately are now allowed to make the switch.

Previously, households with modified adjusted gross income over $100,000 weren’t eligible for Roth conversions, and separate filers were largely barred. But even though the rules now allow almost anyone to make the jump to a Roth IRA, the conversion triggers a taxable event.

Contributions to traditional IRAs and 401(k) plans are made pre-tax–either no taxes were paid on the money, or you were able to take tax deductions against the contributions. In exchange, you pay tax on the money as it’s drawn down in retirement.

With Roth IRAs, you pay taxes as you make contributions so you can withdraw the money tax-free later. If you don’t pay taxes when the conversion is made, you have a government-sanctioned tax dodge, an untenable situation for the Internal Revenue Service (IRS). But the IRS did make one concession on that front; taxpayers can spread any taxable income created by conversion equally across 2011 and 2012, or recognize all of the income in 2010.

Because the conversion is treated as a distribution from your original plan, those under the age of 59-and-a-half will face a 10 percent penalty for breaking the piggybank early.

Although the changes open the door to converting into a Roth account, they don’t guarantee that you’ll be able to make contributions to it in the future. The Roth scheme is aimed at middle-income savers; in 2010, individual tax filers who earn more than $120,000 and joint filers who earn more than $177,000 are ineligible to make contributions.

The main consideration in determining whether conversion is the right move involves whether your expected retirement income will be higher or lower than your current income. Keep in mind that given the huge spending programs enacted to jumpstart the economy, tax rates likely will rise in coming years.

If you expect to face a higher tax rate in your retirement years, it makes sense to convert now and pay a lower relative tax bill. But if you think you’ll face a lower tax rate in the future, stay in your current tax-deferred plan.

Those who stand to benefit the most from a conversion are young people, as they are almost certain to pay more in taxes later in life. Converting into a Roth IRA now provides young folks more time to reap the rewards of tax-free growth.

Even if you don’t think you’ll need the money to fund your retirement, you stand to benefit: Unlike traditional IRA accounts, there are no required distributions on Roth IRAs at age 70 and a half. Roth accounts can be excellent estate planning tools, allowing you to leave more cash and lower tax bills for your heirs.

They also allow a greater degree of flexibility if you need to tap the cash before retirement. If you convert to a Roth and allow five years to elapse, you can withdraw the converted amount plus any additional contributions prior to age 59 and a half without paying taxes or penalties.

The other compelling argument for an IRA conversion is that the price tag is likely much lower now than it will be in the next couple of years because you’ll pay tax on any deductible contributions and any investment earnings. You’re still probably underwater, even after the rally last year, so the investment earnings within your IRA are likely way down, which, in turn, reduces the taxes you’ll owe.

If you’re thinking about making the conversion, the first step is to speak with your tax adviser. He or she should be familiar enough with your circumstances to help you decide whether or not making the switch is right for you.

The logistics of making the switch are easy enough, and you can find the technical details in Internal Revenue Service Publication 590. If you plan to keep your account with the same custodian, you’ll just have to fill out a few forms. No changes to your investments should be required; all you’re changing is the tax treatment.

Be sure to keep an eye on the calendar. Although you have until April 15, 2011, to make a contribution for tax year 2010, the conversion has to be completed by Dec. 31, 2010.