Roth Conversions in 2026: When They Pay and How Much to Convert

What a Roth conversion is

You have two kinds of retirement money.

Pre-tax money (traditional IRA, 401(k), 403(b), SEP or SIMPLE IRA) is taxed as ordinary income when it comes out, and from age 73 or 75 the IRS forces out a required minimum distribution (RMD) each year. Roth money went in after tax, comes out tax-free when qualified, and a Roth IRA has no RMDs during your lifetime (since 2024, neither does a Roth 401(k)). A conversion moves money from the first bucket to the second, and you pay income tax on the amount moved.

A few rules surprise people:

• There is no income limit and no dollar limit. Anyone can convert any amount in any year. The income limits you may have heard about apply to contributing to a Roth IRA, not converting into one.
• The deadline is December 31. Unlike an IRA contribution, you cannot do a 2026 conversion in April 2027.
• Partial conversions are fine, and spreading them over several years is usually how this is done well.
• If you have after-tax money in any traditional IRA, the pro-rata rule decides how much of a conversion is taxable. You cannot pick only the after-tax dollars. I explain that in the pro-rata rule article.

How a Roth conversion is taxed in 2026

The converted amount is added to your other income for the year and taxed at ordinary income rates. It is not a capital gain, and it does not get its own rate. If you are under 59½, the conversion itself is not hit with the 10% early withdrawal penalty, as long as the full amount lands in the Roth (more on that below).

The One Big Beautiful Bill Act, signed July 4, 2025, made the 2017 tax brackets permanent. That matters here. For years, one of the main arguments for converting was “rates go up when the old law sunsets after 2025.” That sunset no longer exists. The case for converting now rests on your own numbers, not on a scheduled tax increase.

2026 federal tax brackets (taxable income)

“Taxable income” is income after deductions. For 2026 the standard deduction is $32,200 for a married couple and $16,100 for a single filer. Each person 65 or older adds $1,650 if married ($2,050 if single).

The 2025 to 2028 senior deduction

The new law also added a separate $6,000 deduction for each person 65 or older, for tax years 2025 through 2028. A married couple who are both 65+ can deduct $12,000 on top of the standard deduction.

Here is the catch for conversions. The deduction shrinks by 6% of modified adjusted gross income (MAGI) above $75,000 single or $150,000 joint. For a couple who both qualify, each spouse’s $6,000 shrinks, so the combined deduction falls by 12 cents for every dollar of income above $150,000 and is gone at $250,000. Inside that range, a conversion taxed in the 22% bracket really costs about 24.6% at the margin. That is easy to miss and it shows up in the example below.

State tax, and the good news for Pennsylvania

Most states with an income tax treat a conversion like any other IRA distribution. Pennsylvania is different. The Pennsylvania Department of Revenue’s PA-40 instructions say a traditional-to-Roth conversion done as a direct trustee-to-trustee transfer (or fully redeposited within 60 days) is not taxable for Pennsylvania personal income tax. Pennsylvania also generally does not tax IRA distributions taken after you reach 59½ and retirement. If you live here, a conversion is usually a federal-only decision, which tilts the math in its favor. Have your CPA confirm how your specific accounts are treated, and remember the rule changes if you might move to a state that does tax the eventual withdrawals or conversions.

The break-even idea: today’s rate versus your future rate

Strip away the details and a Roth conversion is a bet on tax rates.

If your rate is the same now and later, converting is roughly a wash. Convert $100,000 at 22% and $78,000 grows in the Roth; leave it and you pay 22% on the grown amount later. Multiplication does not care about order, so you end up in the same place.

So the conversion pays when one of these is true:

1. Your rate today is lower than your rate later. Converting at 12% to avoid 22% or 24% later is the classic win.
2. You pay the tax from money outside the IRA. Paying $22,000 from a savings account effectively moves that $22,000 into tax-free growth. The non-converter keeps the $22,000, but it sits in a taxable account where growth is taxed every year. This is often where most of the advantage comes from.
3. Someone else would pay a higher rate later. A surviving spouse filing single, or a child inheriting in their peak earning years (more on both below).

It loses when the rate today is higher than the rate later: a high earner converting at 32% who will retire to a 12% bracket is usually making a mistake.

The break-even point depends on growth rates, how long the money stays invested, and where the tax payment comes from. Rather than guess, run your own numbers in our free Roth conversion calculator. It compares converting with doing nothing, invests the tax money on the do-nothing side so the comparison is fair, and shows how many years the conversion needs to pay for itself.

The best windows for converting

Your income is not flat across your life, and the best conversions happen in the valleys.

The gap years

For most of my clients, the biggest window opens between retirement and the start of two other income streams: Social Security and RMDs. Retire at 62 or 65, delay Social Security to 70, and RMDs do not start until 73 (or 75 if you were born in 1960 or later). That can be eight to ten years in which your taxable income is unusually low, because you are living on savings.

Those years are precious. Once Social Security and RMDs arrive, they stack on top of each other and push you into higher brackets for the rest of your life. Converting during the gap shrinks the IRA, which shrinks future RMDs. It also pairs naturally with delaying Social Security, which is worth modeling on its own with our Social Security timing calculator.

Other low-income years

A sabbatical or layoff, a year with a business loss or large deductions, or the first year of retirement if paychecks stopped early can all open a smaller window.

Market dips

A conversion is taxed on the value the day it moves. If your IRA’s shares have fallen 20%, converting them costs 20% less tax, and any recovery happens inside the Roth, tax-free. You do not need to time the bottom, only to notice when values are low in a year you planned to convert anyway. Converting shares in kind keeps you invested.

Filling a bracket on purpose: a 2026 worked example

The core technique is simple. Figure out how much room is left in your current bracket, and convert just enough to fill it.

Meet a married couple, both 66, retired in 2026. They are delaying Social Security to 70. Neither has an RMD yet. They have $40,000 a year of other taxable income (a small pension plus interest), $1.4 million in traditional IRAs, and enough cash and brokerage savings to live on and to pay the conversion tax. They live in Pennsylvania, so the conversion is federal-only.

Their 2026 deductions:

• Standard deduction: $32,200
• Age 65+ add-on: 2 × $1,650 = $3,300
• Senior deduction: 2 × $6,000 = $12,000 (if MAGI stays at or below $150,000)
• Total: $47,500

Without a conversion, their $40,000 of income is entirely covered by deductions. Their federal tax is zero, and they are wasting a 10% and a 12% bracket.

Option A: fill the 12% bracket. The 12% bracket tops out at $100,800 of taxable income. Add back $47,500 of deductions and they can reach $148,300 of income. Subtract the $40,000 they already have: they can convert $108,300. Federal tax: $11,600, an average of about 10.7% on the conversion. MAGI stays under $150,000, so the full senior deduction survives.

Option B: stop just under the first IRMAA tier. IRMAA is the Medicare premium surcharge (explained below), and its first joint threshold in 2026 is $218,000 of MAGI. To keep MAGI at $218,000 they can convert $178,000. Their senior deduction shrinks to $3,840, taxable income is $178,660, and federal tax is $28,729.

Option C: fill the 22% bracket. Because the senior deduction keeps shrinking, reaching the top of the 22% bracket ($211,400 taxable) takes a conversion of about $207,200, for federal tax of about $35,932 and MAGI of about $247,200.

What I take from this table:

• Option A is close to a no-brainer if they expect to be in the 22% bracket or higher once Social Security and RMDs start. They are moving $108,300 at an average of under 11%.
• The dollars between $150,000 and $250,000 of MAGI cost about 24.6%, not 22%, because of the senior deduction phase-out. That is still often worth it, but only if they expect a future rate of at least that much.
• Option C buys $29,232 more conversion for $7,203 more tax, plus roughly $1,949 of extra Part B premiums for the two of them in 2028 (at 2026 rates). That last slice costs about 31%, which is hard to justify for most couples.

For this couple, somewhere between A and B each year until Social Security starts is the plan I would model first, because a $1.4 million IRA left alone can produce RMDs that keep them in the 22% or 24% bracket for life. Your numbers will differ: pensions, dividends, capital gains and itemized deductions all move the lines, so run it with your CPA before December.

Side effects: what else moves when your income goes up

A conversion raises your adjusted gross income for the year. Several things key off that number.

Medicare premiums (IRMAA)

IRMAA (income-related monthly adjustment amount) is a surcharge on Medicare Part B and Part D premiums for higher-income retirees. It uses your tax return from two years earlier: your 2026 income sets your 2028 premiums. That is why people are often surprised by it.

The 2026 Part B tiers, based on 2024 income, look like this:

Part D adds its own surcharge on top. Each tier is a cliff: one dollar over and you pay the full surcharge for that tier. The thresholds that will apply to 2028 premiums are not published yet and are adjusted for inflation, so I plan with a cushion below the current lines.

Conversions also count if you are 63 or 64, because the two-year lookback reaches into the years before Medicare starts. I wrote about the same trap for business owners in your business sale triggers an IRMAA bill two years later.

Sometimes one year of IRMAA is worth paying to shrink a lifetime of RMDs. It is a cost to weigh, not a wall.

Taxation of Social Security

If you are already collecting Social Security, conversion income can make more of your benefit taxable. The thresholds are set in the tax code and have never been indexed for inflation. For a married couple, up to 50% of benefits become taxable once “combined income” (AGI plus tax-exempt interest plus half of your benefits) passes $32,000, and up to 85% once it passes $44,000. Single filers use $25,000 and $34,000.

In that range, each extra dollar of conversion can drag 50 or 85 cents of Social Security into taxable income, so a “12% bracket” conversion can carry a real marginal rate far higher. This is one more reason the years before you claim Social Security are often the cleanest years to convert.

ACA health insurance subsidies

If you retired before 65 and buy coverage on the Affordable Care Act marketplace, a conversion can cost you subsidies. The enhanced premium tax credits that removed the income cap expired at the end of 2025. For 2026, a household above 400% of the federal poverty line gets no premium tax credit at all. For a couple in the lower 48 states buying 2026 coverage, 400% of the poverty line is $84,600.

Crossing that line by $1 can cost thousands in lost subsidy, so many early retirees convert only up to it, or wait for Medicare at 65 to convert in earnest.

The five-year rules (there are two)

People mix these up constantly, so here they are side by side.

Rule 1: Earnings are tax-free only after five tax years from your first Roth IRA funding and after you reach 59½ (or die, become disabled, or use up to $10,000 for a first home). If you have never had a Roth IRA, your first conversion starts the clock. Opening a small Roth IRA years ahead can start it early.

Rule 2: If you are under 59½ and withdraw converted dollars within five years of that conversion, the taxable part of the conversion can be hit with the 10% penalty. Once you are 59½, this rule stops mattering.

Withdrawals come out in a fixed order: regular contributions first, then converted amounts (oldest first), then earnings. Most people over 59½ who leave the money alone for a few years never run into either rule.

No undo button: recharacterization ended in 2018

Before 2018, you could convert in January, watch the market fall, and “recharacterize” (reverse) the conversion by your tax filing deadline. The Tax Cuts and Jobs Act ended that for conversions made in 2018 and later. A conversion is now permanent.

So I size the last conversion of the year in late fall, once income is clear, and leave a margin below each bracket or IRMAA line. A surprise mutual fund capital gains distribution in December has knocked more than one conversion over a line.

Paying the tax: use outside money if you can

How you pay the tax matters as much as how much you convert.

Paying from cash or a taxable account is usually better. The full converted amount keeps growing tax-free.

Withholding the tax from the conversion itself is usually worse. The withheld amount is a distribution that never reaches the Roth: it is taxed, it shrinks what you moved, and if you are under 59½ it can trigger the 10% penalty. With no outside money to pay the tax, a conversion is much less likely to pay off.

A large conversion can also create an underpayment penalty if you wait until April to pay. Estimated payments or extra withholding during the year can prevent that; your CPA can size them.

How conversions interact with RMDs

Once RMDs start, you can still convert. But two rules apply.

You must take your RMD first. The IRS does not let you convert the amount that is required to come out that year. The first dollars out of an IRA in an RMD year count toward the RMD, so take the RMD, then convert anything above it.

Conversions before RMDs shrink the RMDs that follow. Every dollar converted at 66 is a dollar that will not be forced out at 75 and taxed at whatever rate you are in then. For a large IRA, this is often the main reason to convert at all. To see what your RMDs could look like if you do nothing, try our required minimum distribution calculator.

Converting for your heirs: the 10-year rule

Many conversions are really estate planning.

Since 2020, most non-spouse beneficiaries (adult children, for example) must empty an inherited IRA within ten years. If the original owner had already started RMDs, the heir generally must also take annual distributions in years one through nine. Exceptions apply to a surviving spouse, a minor child of the owner, a disabled or chronically ill beneficiary, and someone not more than ten years younger than the owner.

Picture a daughter in her 50s, already in the 32% bracket. Inheriting a $1 million traditional IRA adds roughly $100,000 a year of taxable income on top of her salary for a decade. If you convert in your 60s at 12% to 22%, she inherits a Roth instead. She still must empty it within ten years, but she can usually wait until year ten and take it all tax-free.

The widow’s penalty works the same way. After one spouse dies, the survivor soon files as single: the brackets roughly halve while the IRA and its RMDs do not. Converting while you both file jointly can spare the survivor a much higher rate. Either way, beneficiary designations and any trusts need to line up, which is work for your estate planning attorney.

How Modern Wealth can help

A conversion plan is a multi-year schedule, not a one-time decision: how much to convert each year, which accounts to draw from to pay the tax, and where the IRMAA, Social Security and ACA lines sit for you. I build that schedule as part of my tax planning work, update it every fall before the December 31 deadline, and coordinate the numbers with your CPA, who prepares the return.

Frequently asked questions

Do I pay taxes on a Roth conversion?

Yes. The pre-tax amount is taxed as ordinary income in the year you convert. There is no 10% penalty on the conversion itself if the full amount reaches the Roth. Most states tax it too; Pennsylvania generally does not tax a direct conversion.

Is there a limit on how much I can convert?

No. There is no income limit and no annual dollar limit on conversions. The practical limit is the tax bill, and the brackets, IRMAA tiers and other thresholds your income crosses.

At what age should you not do a Roth conversion?

There is no age cutoff, and conversions can make sense well into your 70s, especially for heirs in higher brackets. Conversions tend to make less sense when your current rate is higher than your expected future rate, when you would have to pay the tax from the IRA itself, or when you need the money within a few years.

What is the downside of a Roth conversion?

You pay a certain tax now for a benefit that depends on future rates, growth and time. The extra income can also raise Medicare premiums two years later, make more Social Security taxable, cut ACA subsidies and shrink the senior deduction. And you cannot reverse it.

What is the 5-year rule for Roth conversions?

Each conversion has its own five-year clock. If you are under 59½ and withdraw converted dollars before that clock runs out, the taxable part can face a 10% penalty. Separately, earnings are tax-free only after five years from your first Roth IRA funding and after age 59½.

Can I do a Roth conversion after RMDs start?

Yes, but you must take that year’s required minimum distribution first. Only amounts above the RMD can be converted.

How much should I convert each year?

A common starting point is to convert enough to fill your current bracket (often the 12% or 22% bracket) while staying below the next IRMAA tier, the ACA subsidy line or a Social Security taxation threshold that applies to you. The right amount depends on what you expect your rate to be later, so it is worth modeling over several years rather than one.

This article is for general education and is not tax, legal or investment advice for your situation. Talk with your tax and legal advisors before acting.

Sources

• IRS, Revenue Procedure 2025-32 (2026 tax brackets, standard deduction, additional deduction for age 65+): https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
• IRS, One Big Beautiful Bill provisions for individuals and workers (senior deduction): https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers
• 26 U.S.C. § 151(d)(5)(C), deduction for seniors and MAGI phase-out: https://www.law.cornell.edu/uscode/text/26/151
• IRS, Retirement plans FAQs regarding IRAs (recharacterization of conversions not allowed after 2017): https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras
• IRS, Publication 590-A (conversions; RMD amounts cannot be converted): https://www.irs.gov/pub/irs-pdf/p590a.pdf
• IRS, Publication 590-B (Roth distributions, five-year periods, ordering rules): https://www.irs.gov/publications/p590b
• IRS, Retirement plan and IRA required minimum distributions FAQs (RMD age, 10-year rule): https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs
• IRS, Internal Revenue Bulletin 2024-33 (final RMD regulations): https://www.irs.gov/irb/2024-33_IRB
• IRS, Publication 915 (taxation of Social Security benefits): https://www.irs.gov/publications/p915
• IRS, Questions and answers on the Premium Tax Credit: https://www.irs.gov/affordable-care-act/individuals-and-families/questions-and-answers-on-the-premium-tax-credit
• HHS ASPE, 2025 Poverty Guidelines Computations: https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2025-poverty-guidelines-computations
• Congressional Research Service, Enhanced Premium Tax Credit and 2026 Exchange Premiums: https://www.congress.gov/crs-product/R48290
• CMS, 2026 Medicare Parts A and B Premiums and Deductibles (IRMAA tiers): https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
• Pennsylvania Department of Revenue, 2025 PA-40 Instructions (IRA conversions, 1099-R treatment): https://www.pa.gov/content/dam/copapwp-pagov/en/revenue/documents/formsandpublications/formsforindividuals/pit/documents/2025/2025_pa-40in.pdf
• Pennsylvania Department of Revenue, Personal Income Tax Guide, Gross Compensation (retirement distributions): https://www.pa.gov/agencies/revenue/forms-and-publications/pa-personal-income-tax-guide/gross-compensation

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