Roth Conversion Windows Everyone Should Know
A Roth conversion strategy is one of the most powerful, yet one of the most misunderstood tools in tax planning. As both a CPA and a financial advisor, I'm often asked the same question: "Does it make sense for me to convert my traditional IRA to a Roth IRA this year?" The honest answer is: it depends on your tax bracket, your time horizon, your healthcare status, and your legacy goals. This post walks through the mechanics of a Roth conversion, the 2026 numbers you need to know, and the financial planning trade-offs that go far beyond the tax return.
Retirement Account Basics
With a traditional IRA, or pre-tax retirement plan (401(k), etc.) the investments grow tax deferred. Once the investments are sold and cash is distributed, the full amount of distribution is subject to ordinary income tax. If you withdrawal $100,000 from your traditional IRA… your ordinary income increases by $100,000 in that year.
With a Roth IRA, or Roth retirement plan (401(k), etc.) the investments grow tax deferred as well. Once the investments are sold and cash is distributed, there is no tax due (as long as you do not trigger the 5-year rule or take funds out before age 59.5). If you withdrawal $100,000 from your Roth IRA… your ordinary income increases by $0.
What Is a Roth Conversion?
A Roth conversion is simply the movement of funds from a traditional IRA, SEP IRA, SIMPLE IRA, or pre-tax employer plan (401(k), 403(b), governmental 457(b)) into a Roth IRA.
Unlike a regular Roth IRA contribution, a Roth conversion has no income limit. Anyone can convert, regardless of income.
The amount converted is taxed as ordinary income in the year of conversion as a “distribution”. There is no 10% early distribution penalty when you do a Roth conversion. BUT if you withdraw converted funds within five years and you're under 59½, the penalty can apply.
By doing a Roth conversion, you are electing to pay the taxes now, rather than later on in retirement when you withdraw the funds. By doing the Roth conversion, you pay taxes now… but the investments in your Roth IRA now grow tax free forever… until you withdraw them… in which the withdraw is also tax free.
The Tax Implications of a Roth Conversion Under Current Law
Here's where CPA judgment matters. A Roth conversion is a taxable event, and under the One Big Beautiful Bill Act (OBBBA), the seven-bracket structure from the Tax Cuts and Jobs Act (TCJA) is now permanent with the top rate staying at 37%. For 2026, the brackets are:
10%: $0 to $12,400 (Single) / $0 to $24,800 (MFJ)
12%: $12,401 to $50,400 (Single) / $24,801 to $100,800 (MFJ)
22%: $50,401 to $105,700 (Single) / $100,801 to $211,400 (MFJ)
24%: $105,701 to $201,775 (Single) /$211,401 to $403,550 (MFJ)
32%: $201,776 to $256,225 (Single) / $403,551 to $512,450 (MFJ)
35%: $256,226 to $640,600 (Single) / $512,451 to $768,700 (MFJ)
37%: above $640,600 (Single) / above $768,700 (MFJ)
A common strategy used is "filling up" to the top of a specific tax bracket. For example, converting just enough of a traditional IRA to Roth IRA in a given year to use the remaining room in the 12% bracket before income spills into the 22% tax bracket. Because conversions are permanent, this decision should be modeled carefully before you execute it.
Roth Conversion Windows
From a tax planning seat, a few life circumstances typically present great opportunities to complete a Roth conversion:
1. Low-income "gap years." The years between retirement and the start of Social Security or Required Minimum Distributions (RMDs) are often the lowest-income years of a client's life. This is typically an ideal window for conversions at reduced tax rates.
2. Charitable offset years. In a year with a large charitable deduction (donor-advised fund contribution, or a bunching strategy), the deduction can absorb some of the ordinary income created by a conversion. A large charitable donation creates a large itemized deduction which lowers your taxable income. Doing a Roth conversions results in a “taxable distribution” and therefore, increases your taxable income. The charitable deduction can offset the increase in income from the Roth conversion.
3. Large medical expense years. In a year where the taxpayer has large medical expenses, Roth conversions should be considered. Everyone knows how expensive health care is today. Especially the monthly cost of nursing homes and skilled care. Often, portions of these medical expenses are deductible as itemized deductions. Large itemized deductions could mean low (or even no) income. This presents a good opportunity to do Roth conversions at very low tax rates.
4. Market downturn conversions. Converting when account values are temporarily depressed means you pay tax on a smaller dollar amount, and all future recovery and growth happens inside the tax-free Roth account.
5. RMD-avoidance for the account owner. Roth IRAs are not subject to lifetime RMDs for the original owner. Converting before your Required Beginning Date reduces future forced taxable distributions (also known as required minimum distributions (RMDs)).
6. Legacy and basis planning for heirs. Under the SECURE Act's 10-year rule, most non-spouse beneficiaries must empty an inherited IRA within 10 years. A traditional IRA forces heirs to recognize ordinary income during what may be their peak earning years. For example, the beneficiary may be in the 22% tax bracket but once forced to take RMDs from the inherited IRA… they may be pushed up into the 32%+ tax bracket. The 10-year distribution window still applies to heirs that inherit a Roth IRA… BUT the heirs will not owe any tax on withdrawals. This could be key if a beneficiary inherits an IRA during their highest earning years.
How Roth Conversions Affect Medicare IRMAA, Health Insurance Premium Tax Credits, and Social Security Taxation
IRMAA
This is the piece that catches even sophisticated clients off guard: a Roth conversion increases your Modified Adjusted Gross Income (MAGI) in the year of conversion, and MAGI is the trigger for the Medicare Income-Related Monthly Adjustment Amount (IRMAA) surcharge on Parts B and D. IRMAA is governed by the Social Security Act rather than the IRC, but it is calculated directly off the MAGI your tax return produces, using a two-year lookback (your 2026 conversion affects your 2028 Medicare premiums).
For 2026, the standard Part B premium is $202.90/month, and IRMAA surcharges begin once 2024 MAGI exceeded $109,000 (single) or $218,000 (MFJ). Because IRMAA operates as a "cliff"… just one dollar over a threshold triggers the full next-tier surcharge. Therefore, a large, one-time conversion can be more costly than several smaller conversions spread across years. When modeling out Roth conversions, you must consider the “hidden tax” or IRMAA surcharges.
Health Insurance Premium Tax Credits
Premium Tax Credits (PTC) are refundable tax credits that lower the monthly cost of health insurance purchased through the Health Insurance Marketplace. The amount is based on your household income and family size. When folks are not yet on Medicare, and do not have health insurance through their employer, they are likely on health insurance provided through the Health Insurance Marketplace (for example, in Pennsylvania we have PA Pennie). Taxpayers with lower income are provided premium credits which effectively reduce their health insurance premiums throughout the year based on a projected income amount. If, at the end of the year when the tax return is prepared, the filer’s income amount is much larger than previously disclosed to The Marketplace, you may be required to “pay back” some or all of the credits. By doing a large Roth conversion, you are increasing your income and therefore, you could lose out on these credits and get slammed with a tax bill during tax season. This MUST be considered when projecting Roth conversions.
Social Security Taxation
A Roth conversion can also increase the taxable portion of Social Security benefits in the year of conversion, since combined income (AGI + tax-exempt interest + one-half of Social Security benefits) determines whether up to 85% of benefits are taxable. In some circumstances, 0% or 50% of your Social Security benefits could be taxed, rather than the maximum 85%. For clients already collecting Social Security, this interaction often argues for smaller, multi-year conversions rather than one large conversion.
Financial Planning Considerations Beyond Taxes for Roth Conversions
As a financial planner, I look at a Roth conversion as one lever in a broader retirement plan, not an isolated tax move:
Where will the tax bill come from? Paying the conversion tax from outside funds (a taxable brokerage account or funds in a bank account), rather than withholding from the IRA itself, preserves more dollars inside the tax-deferred IRA and tax-free Roth IRA... which provides more tax benefits long-term.
Time horizon matters. The longer the converted funds can grow tax-free before you or your heirs need them, the more the conversion tends to pay off. A conversion at age 62 with a 30-year horizon is a very different analysis than one at age 78 with a 14-year horizon. Those 16 years could mean some serious compounding of tax free dollars in your Roth account!
State income tax. Some states don't tax retirement account distributions at all, and others tax Roth conversions the same as ordinary income. If you're planning a future move to a no-tax or low-tax state in retirement, converting before you move may cost you state tax you could otherwise have avoided.
Asset location and portfolio construction. Roth accounts are ideal for your highest expected return assets, since none of that growth will ever be taxed. Conversions are a good opportunity to rebalance which assets sit in which account type. This is all dependent upon the client’s risk tolerance and overall situation. This should be analyzed closely.
Long-term care and Medicaid planning. Because Roth withdrawals don't count as taxable income, a Roth-heavy retirement portfolio can also help preserve eligibility thresholds tied to income in certain benefit and long-term-care planning contexts.
Frequently Asked Questions about Roth Conversions
Can I undo a Roth conversion if I change my mind? No. Once you convert, the transaction is final for tax purposes, which is exactly why modeling the conversion amount in advance is so important.
Do I have to convert my entire IRA at once? No, and in most cases you shouldn't. Partial conversions let you control precisely how much ordinary income you generate in a given year, which is the entire point of "filling up" a bracket without spilling into the next one.
Does a Roth conversion count toward my Required Minimum Distribution? No. If you're subject to RMDs, you must satisfy that year's RMD before any additional dollars from that account can be converted; the RMD amount itself is not eligible for conversion.
What tax form reports a Roth conversion? Your custodian issues a Form 1099-R for the distribution from the traditional account, and you report the conversion on Form 8606 to track basis and calculate the taxable amount, particularly important if you have nondeductible contributions mixed with pre-tax dollars.
Is a Roth Conversion Right for You?
A Roth conversion strategy is never a one-size-fits-all decision. Whether it makes sense in 2026 depends on many factors, including but not limited to: your current tax bracket versus your expected future bracket, your Medicare timeline, your Social Security taxation exposure, and your goals for what you leave behind. Working with a professional who thinks about LIFETIME TAX SAVINGS and considers all factors is the best way to make sure a conversion helps you rather than costs you.
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The tax and estate planning information offered by the advisor is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
This article is for general educational purposes and does not constitute individualized tax or investment advice. Please consult a qualified CPA or CFP® professional regarding your specific situation.
