How a Roth conversion works
You can convert all or part of a traditional IRA into a Roth IRA, including a SEP IRA, or a SIMPLE IRA after your first two years in the employer’s plan. Pre-tax money in a 401(k), 403(b) or governmental 457(b) can also be rolled into a Roth IRA, and a plan that allows it can do an in-plan Roth rollover into its own Roth account. The money can move by direct transfer or by a 60-day rollover of money paid to you.
There is no income limit and no dollar cap. The taxable part counts as income for the year the money leaves the pre-tax account, while any after-tax basis moves over tax-free. In practice a conversion takes four steps:
- Open the Roth IRA that will receive the money, or confirm that your workplace plan allows in-plan Roth rollovers.
- Ask the custodian for a direct conversion or trustee-to-trustee transfer, and decide whether any tax should be withheld from it.
- Plan how to pay the tax, through higher withholding from other income or estimated tax payments.
- Report an IRA conversion in Part II of Form 8606 with that year’s return.
How a conversion is taxed in 2026
A conversion is ordinary income, stacked on top of wages, pensions and withdrawals and taxed at your marginal rate, which is why conversions are usually sized to fill a bracket. For 2026 the 12% bracket ends at $100,800 of taxable income for married couples filing jointly ($50,400 single), and the 22% bracket at $211,400 ($105,700 single). Most states with an income tax also tax conversions.
The bigger surprises come from rules that read adjusted or modified AGI. A conversion can make more of your Social Security taxable, the effect known as the tax torpedo. It can add Medicare IRMAA surcharges two years later and shrink the senior deduction. It isn’t investment income, yet by raising MAGI it can expose dividends and gains to the net investment income tax, and before Medicare it can cost a marketplace premium tax credit. The table below lists the 2026 lines for a joint return.
Add those effects to the bracket rate and you have the true cost of the next converted dollar, the number to compare with the rate you expect to avoid later.
When a Roth conversion tends to pay off
The test is simple: a conversion helps when the rate you pay now is lower than the rate the same dollars would face later, whether you withdraw them, required distributions force them out, or heirs inherit them. Growth alone doesn’t change the answer, because the Roth and the untouched pre-tax account compound at the same rate, as the formula below shows.
Low-rate windows are the usual opportunity: the years between retiring and starting Social Security or RMDs, a sabbatical or job loss, or a year with large deductions. Other things push the later rate up. RMDs from a large balance stack on top of Social Security. A surviving spouse files as single on much the same income, the widow’s penalty. Most non-spouse heirs must empty an inherited pre-tax account within ten years, often during their own peak earning years.
Converting tends to disappoint when your later rate will be lower: a planned move to a state without an income tax, modest retirement income, or IRA money you intend to give to charity through qualified charitable distributions after 70½.
Roth conversion vs. Roth contribution and the backdoor Roth
A Roth IRA contribution is new money from earned income, capped at $7,500 for 2026 ($8,600 at 50 or older) and phased out at modified AGI of $153,000–$168,000 for single filers and $242,000–$252,000 for joint filers. A conversion has neither limit and doesn’t use up contribution room, because it moves money you already saved, but it carries a tax bill that a contribution doesn’t.
The backdoor Roth IRA combines the two: a nondeductible traditional IRA contribution, converted soon after. It stays nearly tax-free only when you hold no other pre-tax IRA money, because the pro-rata rule gives every conversion the same taxable share as all your traditional, SEP and SIMPLE IRAs combined. With $10,000 of basis in $100,000 of IRA money, 90% of every converted dollar is taxable.
A Roth conversion ladder is a series of yearly conversions arranged so each can be spent before 59½ once its own five-year wait ends.
Rules and mistakes to watch
Most conversion errors are permanent. A conversion made in 2018 or later can’t be recharacterized back to a traditional IRA, and an in-plan Roth rollover can’t be undone either, so the tax is locked in once the money moves. Keep each year’s Form 8606 and conversion records, because the ordering rules for every later Roth withdrawal depend on which dollars were converted when. The costly surprises usually come from four details:
- Spending too soon: under 59½, each conversion has its own five-year clock, starting January 1 of the conversion year, before the converted amount comes out free of the 10% tax.
- Converting the RMD: in a year you owe a required minimum distribution, take it first. That amount can’t be converted, and a conversion doesn’t satisfy it.
- Withholding from the conversion before 59½: the withheld tax isn’t converted, so it is a taxable distribution that can also face the 10% additional tax.
- Rolling a workplace plan through your own hands: a plan distribution paid to you has 20% withheld, while a direct rollover to a Roth IRA generally has none.
Illustrative numbers
A retired couple converts $43,000 to fill the 12% bracket in 2026
- A
- Amount converted
- r
- Annual growth rate, assumed the same in the Roth and in the pre-tax account
- n
- Years until the money would otherwise be withdrawn
- t_now
- All-in marginal rate on the conversion today, including state tax and threshold effects
- t_later
- Marginal rate the same dollars would face when withdrawn or inherited
The same holds at 59½ or older if the tax is paid from savings earning the same return; paying it from taxable savings adds an edge by ending their yearly tax drag.
Other 2026 income, a pension and interest$90,000
Standard deduction, married filing jointly, both under 65−$32,200
Taxable income before converting$57,800
Room left in the 12% bracket, which ends at $100,800$43,000
Federal tax on a $43,000 conversion at 12%$5,160
Tax on the same $43,000 withdrawn later at 22%$9,460
Converting saves $4,300 of federal tax on those dollars, and the gap grows with the account: at 5% a year for 15 years it is worth about $8,940. Their MAGI of $133,000 stays under the first 2026 joint IRMAA threshold of $218,000. If their later rate turns out to be 12% or lower, the conversion gains nothing.
At a glance
Where a 2026 Roth conversion can cost more than its bracket rate (married filing jointly)
| Rule | 2026 line on a joint return | What extra conversion income does |
|---|---|---|
| Long-term capital gains 0% rate | Taxable income up to $98,900 | Pushes gains above the line into the 15% rate |
| Taxation of Social Security | Provisional income over $32,000, then $44,000 | Makes up to 50%, then up to 85%, of benefits taxable |
| Senior deduction, 2025–2028 | MAGI over $150,000 | Phases out the $6,000-per-person deduction at 6% of the excess |
| Medicare IRMAA | MAGI over $218,000, read two years later | Adds surcharges to Part B and Part D premiums |
| Net investment income tax | MAGI over $250,000 | Adds 3.8% on investment income above the line |
| ACA premium tax credit | Income above 400% of the poverty line, $84,600 for two in the 48 contiguous states | Ends the credit for 2026 marketplace coverage |
Put it in your plan
Roth conversion in MoneyWhatIf
The Tax planning page reruns the whole plan with Roth conversions filling each federal bracket from 10% to 35% and compares every schedule with converting nothing. Guardrails can cap the yearly amount or hold income under a capital-gains rung, the NIIT threshold, a chosen IRMAA cliff or the ACA line. A bracket is recommended only if it passes a safety check and improves ending after-tax wealth or relieves unmet spending. Apply to plan saves the schedule, the Taxes page then shows a Roth conversions income line in each conversion year, and the projection models each conversion’s own five-year clock.
Common questions
Roth conversion FAQs
Is there an income limit on Roth conversions?
No. Anyone with money in a traditional IRA or an eligible workplace plan can convert, whatever their income or filing status. Before 2010, conversions required modified AGI of $100,000 or less and a filing status other than married filing separately; both conditions were eliminated. There is no annual dollar cap either.
Do you pay a 10% penalty on a Roth conversion before 59½?
Not on the conversion itself. IRS Publication 590-A says the 10% additional tax doesn’t apply to an amount properly converted. It can apply in two other ways: to any part of the distribution you keep, including tax withheld from it, and to converted money you withdraw from the Roth IRA within five years of that conversion while you are still under 59½.
Is there a deadline for a Roth conversion?
In effect, December 31. A conversion is income for the year the money leaves the traditional IRA or workplace plan, so a 2026 conversion has to be completed in 2026. Unlike a Roth IRA contribution, it can’t be made for the prior year up to the April filing deadline. The final weeks of the year are the last chance to top up a bracket, once the year’s other income is mostly known.
How much should I convert to a Roth each year?
A common approach is to size each conversion to a line rather than a round number: the top of a federal bracket, such as the 12% bracket’s $100,800 of taxable income on a 2026 joint return, or just under a costlier threshold such as the first IRMAA tier or the ACA’s 400% line. Several moderate conversions in low-income years usually beat one large one.
Should I pay the conversion tax from the IRA or from other savings?
Paying from other savings usually works better. The full converted amount stays sheltered in the Roth, and the cash you use would otherwise face yearly tax on its interest, dividends or gains. Paying from the IRA shrinks what lands in the Roth, and before 59½ the withheld amount counts as an early distribution.
Are Roth conversions still worth it now that the 2017 tax cuts are permanent?
They can be, but for different reasons. The One Big Beautiful Bill Act made the seven brackets permanent, so beating a scheduled 2026 rate increase is no longer the argument. The case now rests on your own rate path: a low-income gap before RMDs, RMDs stacked on Social Security, a surviving spouse filing single, or heirs in high brackets.