Dollar figures in this piece are for tax year 2026.
A Roth conversion moves money from a traditional IRA to a Roth IRA, and the amount moved is taxed as ordinary income in the year you do it. That is the whole cost. The rest is arithmetic: which of your income dollars the conversion lands on, and whether paying now beats paying later.
The decision is for anyone with pre-tax IRA money and some control over income in a given year. Think of a retiree between work and Social Security, a couple with a low-income year, or a physician in a fellowship year or a partial year of work. The answer is a number, so this page runs one.
What the tax law says
Under § 408A(d)(3), a conversion of a traditional IRA to a Roth IRA is treated like a rollover distribution, and the amount that would have been taxable goes into your gross income. IRS Publication 590-A says these amounts are normally included on your return for the year you converted them. The usual 10% additional tax on early distributions does not apply to the conversion itself.
The rate is nothing special. The converted amount stacks on top of your other income and is taxed at the same ordinary rates, so a $100,000 conversion can cost two people very different amounts. If stacking is fuzzy, the page on brackets versus rates covers it.
Basis changes the amount. If your traditional IRAs include nondeductible contributions, the Code treats all of your traditional, SEP and SIMPLE IRAs as one contract (§ 408(d)(2)). A conversion is then taxable in proportion to the pre-tax money across all of them, and you cannot choose to convert only the basis. Form 8606 does that math.
Example, hypothetical: filling the bracket
Take a single filer with $90,000 of other income and the 2026 standard deduction of $16,100. Taxable income before any conversion is $73,900, and federal tax on that is $10,970. The brackets come from Rev. Proc. 2025-32: 10% to $12,400, 12% to $50,400, 22% to $105,700, 24% to $201,775 and 32% to $256,225.
This filer is already in the 22% bracket, with $31,800 of room before 24% begins. Converting up to that point costs 22 cents on the dollar. Past it, each dollar costs 24 cents until taxable income reaches $201,775, which takes a conversion of $127,875. After that, 32%. The chart shows the added cost of each $10,000 slice and the table shows the running total. State income tax is not included.
| Added tax on that slice | |
|---|---|
| 0-10k | $2,200 |
| 10-20k | $2,200 |
| 20-30k | $2,200 |
| 30-40k | $2,364 |
| 40-50k | $2,400 |
| 50-60k | $2,400 |
| 60-70k | $2,400 |
| 70-80k | $2,400 |
| 80-90k | $2,400 |
| 90-100k | $2,400 |
| 100-110k | $2,400 |
| 110-120k | $2,400 |
| 120-130k | $2,570 |
| 130-140k | $3,200 |
| 140-150k | $3,200 |
The cost per slice steps up from $2,200 to $2,400 once the conversion crosses into the 24% bracket, and to $3,200 in the 32% bracket.
Computed from Rev. Proc. 2025-32 single brackets and $16,100 standard deduction; $90,000 other income
Total tax on the conversion
| Converted | Added tax | Average rate on conversion | Taxable income | Added tax on last $10,000 |
|---|---|---|---|---|
| $0 | $0 | n/a | $73,900 | n/a |
| $10,000 | $2,200 | 22.0% | $83,900 | $2,200 |
| $30,000 | $6,600 | 22.0% | $103,900 | $2,200 |
| $40,000 | $8,964 | 22.4% | $113,900 | $2,364 |
| $60,000 | $13,764 | 22.9% | $133,900 | $2,400 |
| $90,000 | $20,964 | 23.3% | $163,900 | $2,400 |
| $120,000 | $28,164 | 23.5% | $193,900 | $2,400 |
| $130,000 | $30,734 | 23.6% | $203,900 | $2,570 |
| $150,000 | $37,134 | 24.8% | $223,900 | $3,200 |
The average rate on the full $150,000 is 24.8%, well under the 32% bracket where the last dollars land. Of the $150,000, $31,800 is taxed at 22%, $96,075 at 24% and $22,125 at 32%. Whether to stop at $30,000, at $127,875 or somewhere else depends on what you expect your rate to be later. This table cannot settle that alone.
Bracket-filling, and the problems it can create
Bracket-filling means converting enough to use up the room in your current bracket and stopping before the next one. In the example, that is the first $31,800 at 22%. It picks a ceiling. It does not guarantee that converting wins. The case for it is that 22% now beats a higher rate on the same dollars later. The case against is the reverse: if your future rate will be lower, you paid too much.
A conversion also raises your adjusted gross income, and other formulas read that number. Social Security benefits become taxable under § 86 once income plus half of benefits passes $25,000 single or $32,000 joint, and 85% of benefits can be taxed above $34,000 or $44,000. A conversion in a year you collect benefits can pull more of them into income. For people with investment income, a higher modified AGI can also bring the 3.8% net investment income tax under § 1411, which applies above $200,000 single or $250,000 joint. I did not verify Medicare premium surcharges against the library for this page, so ask about them if you are on or near Medicare.
Pay the tax from outside money
A conversion is worth the most when the tax comes from a checking or brokerage account, not from the IRA. Tax withheld from the IRA never reaches the Roth, and it is still part of the distribution you are taxed on. Paying from outside funds keeps the whole converted balance growing tax-free.
Plan the cash first. Publication 590-A notes that if you must include an amount in income, you may have to raise your withholding or make estimated payments. A large conversion late in the year with nothing set aside can leave a bill in April and an underpayment problem on top. The estimated tax page explains the schedule.
The five-year rules, at a high level
There are two separate clocks, and people mix them up. The first decides whether a withdrawal of earnings is a qualified (tax-free) distribution. Under § 408A(d)(2), a distribution is qualified when it is made after age 59½, at death, on disability, or as a qualified special purpose distribution. It is not qualified if made within five taxable years starting with the first year you made any contribution to a Roth IRA.
The second clock runs per conversion. Under § 408A(d)(3)(F), withdrawing converted money within five taxable years of that conversion can bring back the 10% additional tax on the part that was taxed at conversion. Publication 590-B says a separate five-year period applies to each conversion. Ordering rules in § 408A(d)(4) decide which dollars come out first, and conversions come out first-in, first-out. If you plan to touch converted money inside five years, work out the order first.
The IRA rules say it that way. Here is what it means.
| What you read | What it means |
|---|---|
| Undo a conversion by treating it as a traditional IRA contribution. Not allowed for conversions after 2017 | |
| Money in your traditional IRAs that was already taxed, such as nondeductible contributions | |
| All your traditional, SEP and SIMPLE IRAs are counted together when figuring the taxable share of a conversion | |
| The form that reports the conversion and your basis | |
| A Roth withdrawal of earnings that comes out tax-free | |
| Converting enough to use up the room in your current bracket and stopping before the next |
When a conversion tends to make sense, and when it tends not to
- Low-income yearA gap year, a fellowship year, early retirement before benefits or required distributions. Room in the 10%, 12% or 22% brackets is cheap.
- Long horizonYears of tax-free growth give the conversion more time to pay for itself, and the Roth does not have to be touched soon.
- Higher rates aheadIf you expect a larger income or higher rates later, paying now at a lower rate is the direct bet.
- Cash to pay the taxMoney outside the IRA that you will not need elsewhere makes the math work as shown.
- Where it tends not toPeak earning years with no bracket room, a need for the funds within five years, or no outside cash for the tax.
- Where it dependsSame bracket now and later, a move to a different state, or benefit thresholds nearby. Run both years before deciding.
Common mistakes
- Converting a round number without projecting the rest of the year's income, which can push you through a bracket you did not plan to enter.
- Paying the tax out of the converted IRA balance instead of from outside money.
- Forgetting that the IRA aggregation rule can make part of every conversion taxable when nondeductible basis sits elsewhere.
- Assuming a conversion can be reversed if the market falls. For conversions after 2017 it cannot.
- Ignoring what higher AGI does to Social Security taxation and the net investment income tax.
- Treating the five-year clocks as one rule, when the qualified-distribution clock and the per-conversion clock are different.
The usual way versus doing it right
Convert and see
- Convert a round number without a full-year income projection
- Pay the tax out of the IRA itself
- Assume a bad market means an undo
Price it first
- Project the full year and compute the added tax at each $10,000 step
- Pay the tax from money outside the IRA
- Treat a conversion after 2017 as final
What to do
Project this year's income
Estimate your other income and deductions for the full year before choosing an amount, so you know where taxable income sits before the conversion.
Pick the ceiling
Decide how far up to go, using your bracket room as a guide and not a target. Compute the added tax at each $10,000 step, as the table does.
Gather cash for the tax
Set aside money outside the IRA, and adjust withholding or estimated payments if the bill is large.
Convert before December 31
The conversion counts in the year you do it, so a 2026 conversion has to be completed in 2026. If bracket room is limited, a smaller conversion this year is a legitimate choice.
File Form 8606
Report the conversion and any basis. Check the 1099-R and the 8606 against each other before filing, and keep the five-year dates in your records.
