2026 Roth Conversions: How Much Should You Convert Before Year-End?
As year-end approaches, one of the most valuable tax-planning questions for many investors is also one of the most misunderstood:
Should I convert part of my traditional IRA to a Roth IRA before December 31?
The answer isn’t simply yes or no.
For the right household, a Roth conversion can reduce lifetime taxes, decrease future required minimum distributions, create more flexibility in retirement, and leave heirs a more tax-efficient asset.
For someone else, the exact same conversion could simply accelerate a large tax bill unnecessarily.
The real question isn’t whether Roth conversions are good.
It’s: How much should you convert, at what tax rate, and in which years?
That requires looking beyond your current tax bracket.
What Is a Roth Conversion?
A Roth conversion moves money from a pretax retirement account, such as a traditional IRA, into a Roth IRA.
You generally pay ordinary income tax on the taxable portion of the amount converted. In exchange, that money moves into the Roth environment, where qualified future withdrawals can be tax-free.
There is no income limit preventing a high-income taxpayer from completing a Roth conversion. This is different from making a direct Roth IRA contribution, which is subject to income limitations.
For example, suppose you convert $100,000 from a traditional IRA to a Roth IRA and the entire amount consists of pretax dollars.
That $100,000 is generally added to your taxable income for the year of conversion.
You pay the tax today. The objective is for the future benefits of having that money in a Roth IRA to outweigh the tax cost of converting it.
The 2026 Federal Tax Brackets Matter
For married couples filing jointly, the 2026 federal income tax brackets are:
Taxable Income
Marginal Federal Rate
$0 – $24,800
10%
$24,801 – $100,800
12%
$100,801 – $211,400
22%
$211,401 – $403,550
24%
$403,551 – $512,450
32%
$512,451 – $768,700
35%
Over $768,700
37%
For single filers:
Taxable Income
Marginal Federal Rate
$0 – $12,400
10%
$12,401 – $50,400
12%
$50,401 – $105,700
22%
$105,701 – $201,775
24%
$201,776 – $256,225
32%
$256,226 – $640,600
35%
Over $640,600
37%
The 2026 standard deduction is $32,200 for married couples filing jointly and $16,100 for single filers.
These brackets create opportunities, but simply “filling up a tax bracket” isn’t always the right strategy.
The better approach is to calculate the effective marginal cost of each additional dollar converted.
An Example: Filling the 24% Tax Bracket
Consider a married couple with $300,000 of taxable income before any Roth conversion.
The 24% federal bracket extends to $403,550 in 2026.
At first glance, they could convert approximately:
$403,550 − $300,000 = $103,550
That would allow them to recognize another $103,550 of ordinary taxable income without entering the 32% federal bracket.
A $100,000 conversion would create approximately $24,000 of additional federal income tax if every conversion dollar falls within the 24% bracket.
That might be attractive.
But we aren’t done.
The conversion could also affect:
· State income taxes
· Medicare premiums
· Net Investment Income Tax exposure
· Taxation of capital gains
· Taxation of Social Security
· Certain deductions and credits
· Estimated tax requirements
This is why we view Roth conversion planning as a multi-year tax-planning exercise, not simply a tax-bracket exercise.
When Does a Roth Conversion Make Sense?
1. You’re Temporarily in a Lower Tax Bracket
Some of the best Roth conversion opportunities occur during unusually low-income years.
A common example is the period between retirement and the beginning of required minimum distributions.
Imagine someone retires at 62.
Their salary disappears, but they don’t yet have required minimum distributions. They may also decide to delay Social Security.
That can create several years of unusually low taxable income.
Instead of allowing those low tax brackets to go unused, they may intentionally recognize income by converting portions of a traditional IRA to a Roth IRA.
The goal is to pay tax at a known rate today rather than potentially paying a higher rate later.
2. You Have a Large Traditional IRA
The larger your pretax retirement accounts become, the more important future tax planning may become.
Traditional IRA assets generally create taxable income when withdrawn. They can also eventually generate required minimum distributions.
A retiree with several million dollars in pretax retirement accounts may discover that RMDs eventually create far more taxable income than they actually need for spending.
Roth conversions can potentially reduce that future problem.
You intentionally recognize some income today, reducing the balance that remains subject to future RMDs.
Meanwhile, Roth IRA owners aren’t required to take lifetime RMDs from their own Roth IRAs.
That can provide substantially more control over future taxable income.
3. You Expect Your Future Tax Rate to Be Higher
At its core, Roth conversion planning is a tax-rate arbitrage decision.
Suppose you can convert $100,000 today at a 24% federal marginal rate.
If those dollars would otherwise eventually be distributed at a 35% marginal rate, paying the tax earlier could be attractive.
But if you’re paying 35% today and expect to withdraw the money at 22% later, the conversion becomes much harder to justify.
No one knows exactly what future tax rates will be.
But we can estimate future taxable income based on:
· Retirement income
· Pensions
· Social Security
· Investment income
· Required minimum distributions
· Business income
· Real estate income
· Expected retirement account growth
The comparison should be between your marginal tax rate today and your expected marginal tax rate when the money would otherwise be withdrawn.
4. The Market Has Declined
Market declines can create attractive Roth conversion opportunities.
Suppose an investment worth $150,000 falls to $110,000.
If you still believe in the long-term investment thesis, converting the investment while its value is temporarily lower could allow you to recognize $110,000 of taxable income rather than $150,000.
If the investment subsequently recovers inside the Roth IRA, that future appreciation may occur within the Roth environment.
This doesn’t mean you should try to time the market.
But market volatility can create tax-planning opportunities worth evaluating.
The Medicare IRMAA Trap
For retirees approaching or already enrolled in Medicare, Roth conversions require another layer of analysis.
Medicare Part B and Part D premiums can increase for higher-income beneficiaries through the Income-Related Monthly Adjustment Amount, commonly called IRMAA.
For 2026, the first IRMAA threshold begins when modified adjusted gross income exceeds $109,000 for a single filer or $218,000 for married couples filing jointly.
Higher income levels can result in progressively larger Medicare premium surcharges.
A large Roth conversion increases adjusted gross income and therefore can potentially push someone into a higher IRMAA tier.
This doesn’t automatically mean you should avoid the conversion.
Paying an additional Medicare premium could still make economic sense if the long-term tax benefit is significantly larger.
But it should be included in the calculation.
A conversion that appears to cost 24% federally may have a higher effective marginal cost after considering Medicare premiums and state taxes.
Roth Conversions and the 3.8% Net Investment Income Tax
Another consideration for higher-income households is the 3.8% Net Investment Income Tax, or NIIT.
The NIIT generally applies to certain net investment income once modified adjusted gross income exceeds:
· $200,000 for single filers
· $250,000 for married couples filing jointly
A Roth conversion itself generally isn’t net investment income.
However, a conversion increases adjusted gross income.
That higher income can cause a greater portion of a household’s actual net investment income—such as interest, dividends or capital gains—to become subject to the 3.8% tax.
Consider a married couple with significant portfolio income.
They complete a large Roth conversion that pushes their modified adjusted gross income well above $250,000.
The conversion isn’t itself subject to the 3.8% NIIT, but it may indirectly increase the amount of their investment income exposed to the tax.
That’s an important distinction.
Roth Conversions and Capital Gains
Roth conversions can also interact with capital-gain planning.
Long-term capital gains are taxed using a different rate structure than ordinary income.
A large Roth conversion increases taxable income, which can affect the rate applied to capital gains.
This becomes particularly important for investors who are simultaneously:
· Selling appreciated stock
· Diversifying concentrated positions
· Exercising equity compensation
· Selling a business
· Realizing large capital gains
· Harvesting gains intentionally
Rather than analyzing a Roth conversion in isolation, we generally want to see the household’s entire tax return projected before determining the appropriate conversion amount.
Don’t Forget State Income Taxes
Federal taxes are only part of the calculation.
For residents of high-income-tax states, state taxation can materially change the economics of a Roth conversion.
This is particularly relevant for Oregon residents.
If you’re currently living in Oregon but expect to move to a lower-tax or no-income-tax state in retirement, converting a large IRA while you’re still an Oregon resident could mean voluntarily paying state tax that might otherwise have been avoided.
The reverse can also occur.
Someone living in a low-tax state today who expects to move to a higher-tax state later may have an additional reason to consider converting earlier.
Where you expect to live during retirement can therefore be an important part of Roth conversion planning.
Should You Convert Before Required Minimum Distributions Begin?
For many retirees, this is one of the most important planning windows.
Traditional IRA owners generally must eventually begin taking required minimum distributions.
Once RMDs begin, you have less control over your taxable income because a certain amount must come out each year.
There is also an important ordering rule:
An RMD itself cannot be converted to a Roth IRA.
If you’re already subject to an RMD, you generally must satisfy that year’s required distribution before converting additional IRA dollars.
That makes the years before RMDs particularly valuable.
Someone retiring in their early 60s could potentially have a decade-long window to strategically move pretax assets into Roth accounts before RMDs become a major factor.
Roth Conversions Can Be an Estate-Planning Strategy
Roth conversions aren’t only about your own retirement.
They can also affect what your heirs inherit.
Under current inherited IRA rules, many non-spouse beneficiaries are required to empty inherited retirement accounts within 10 years.
If a child inherits a large traditional IRA during their peak earning years, distributions from the inherited account can create substantial additional taxable income.
A Roth IRA can be more attractive from an estate-planning perspective because qualified Roth distributions can generally be received income-tax-free.
Many non-spouse Roth beneficiaries are still subject to the 10-year distribution framework, but the income-tax characteristics are dramatically different.
That means the relevant comparison isn’t always:
What tax rate will I pay today versus what tax rate will I pay later?
Sometimes it’s:
What tax rate will I pay today versus what tax rate might my children pay when they inherit the account?
For families with significant retirement assets, that can materially change the analysis.
Should You Pay the Conversion Tax From the IRA?
When possible, paying the conversion tax from assets outside the IRA can make a Roth conversion more attractive.
Consider a $100,000 conversion.
If you convert the entire $100,000 and pay the resulting tax from a taxable bank or brokerage account, the full $100,000 gets into the Roth IRA.
If instead you withhold $25,000 from the IRA to cover taxes, only $75,000 reaches the Roth.
For investors under age 59½, withholding money from the IRA can create additional complications because amounts not successfully converted may potentially be treated as an early distribution and subject to an additional tax unless an exception applies.
The funding source for the tax bill should therefore be part of the conversion analysis.
Be Careful: Roth Conversions Can’t Simply Be Undone
Years ago, taxpayers could convert an IRA to a Roth and later reverse—or “recharacterize”—the conversion if they changed their minds.
That is no longer permitted for Roth conversions.
Once you complete a Roth conversion, you generally cannot recharacterize that conversion back into a traditional IRA.
That makes accurate planning before executing the conversion even more important.
Instead of making one large conversion early in the year, some investors may benefit from completing conversions in stages as their actual income becomes clearer.
How Much Should You Convert in 2026?
There isn’t one universal answer.
For many households, we start by asking five questions:
1. What is your projected taxable income before the conversion?
We want a reasonably accurate estimate of wages, retirement income, investment income, business income, deductions and realized gains.
2. Which tax bracket are you currently in?
Then we determine how much room remains before the next meaningful marginal rate increase.
3. What will your future income look like?
This includes projected Social Security, pensions, RMDs and investment income.
4. Are there secondary tax consequences?
We evaluate Medicare IRMAA, NIIT, capital gains, state taxes and other income-sensitive provisions.
5. What happens if you don’t convert?
This may be the most important question.
We project the traditional IRA forward and estimate future RMDs and taxes.
Without that comparison, it’s difficult to know whether voluntarily paying tax today actually improves the long-term outcome.
A Simplified Roth Conversion Example
Consider a married couple, both age 65.
They have:
· $2.5 million in traditional IRAs
· $500,000 in Roth IRAs
· $1.5 million in taxable investments
· $180,000 of projected taxable income for 2026
· No immediate need to withdraw heavily from their IRAs
Their taxable income puts them within the 22% federal bracket.
The 24% bracket begins above $211,400 and extends through $403,550 for married couples filing jointly in 2026.
They could potentially convert a meaningful amount while remaining within the 24% federal bracket.
But that doesn’t mean they should automatically convert enough to reach $403,550.
We would also want to model:
· Their state income tax
· Medicare IRMAA
· Investment income and NIIT
· Future Social Security
· Future RMDs
· Expected portfolio growth
· Their anticipated longevity
· Their heirs’ potential tax rates
· How they will pay the conversion tax
The optimal answer could be $50,000.
It could be $150,000.
It could be more.
Or the best decision could be not to convert at all.
The value comes from modeling the tradeoff rather than relying on a rule of thumb.
Roth Conversion vs. Roth Contribution: An Important Distinction
A Roth IRA contribution and a Roth conversion are not the same thing.
Direct Roth IRA contributions are subject to income limitations.
Roth conversions are not subject to the same income restriction.
This is why someone earning too much to contribute directly to a Roth IRA can still potentially convert traditional IRA assets into a Roth IRA.
It is also separate from the commonly discussed “backdoor Roth IRA” strategy.
A large Roth conversion typically involves intentionally moving existing pretax retirement assets into a Roth account and recognizing the resulting taxable income.
When a Roth Conversion May Not Make Sense
Roth conversions aren’t automatically beneficial.
Think carefully before converting if:
· You’re currently in an unusually high tax bracket.
· You expect your future marginal tax rate to be substantially lower.
· You plan to move from a high-tax state to a no-income-tax state soon.
· You need IRA assets to pay the conversion tax.
· The conversion creates significant unintended Medicare or other tax consequences.
· You expect to make substantial qualified charitable distributions from your IRA later in retirement.
· You have significant charitable intentions that could reduce the value of converting pretax assets.
For example, someone who expects to leave a traditional IRA directly to charity may have little reason to prepay income tax by converting those dollars to Roth.
Context matters.
The December 31 Deadline Matters
Roth conversions are reported for the calendar year in which they occur.
If you want a conversion included in your 2026 taxable income, it generally needs to be completed during 2026.
Waiting until the final days of December can create unnecessary operational risk.
Before executing a year-end conversion, make sure you have a reasonably accurate estimate of:
· 2026 income
· Capital gains and losses
· Charitable contributions
· Business income
· Retirement distributions
· Itemized deductions
· Estimated tax payments
This is why October and November can be excellent months to begin the analysis.
The Bigger Picture: Tax Diversification
Ultimately, Roth conversion planning is about more than reducing this year’s tax bill.
It’s about tax diversification.
An investor entering retirement with assets spread among taxable accounts, pretax retirement accounts, and Roth accounts has significantly more flexibility than someone whose wealth is concentrated almost entirely in a traditional IRA or 401(k).
Different accounts can be used strategically in different years.
That flexibility may help manage:
· Tax brackets
· Capital gains
· Medicare premiums
· Charitable giving
· Required distributions
· Estate planning
· Large one-time expenses
The goal isn’t necessarily to eliminate your traditional IRA.
It’s to determine whether your current mix of taxable, tax-deferred and tax-free assets gives you enough control over your future tax liability.
Before You Convert: A 2026 Roth Conversion Checklist
Before completing a Roth conversion, consider reviewing:
· Your projected 2026 taxable income
· Your current federal marginal tax bracket
· Your state income-tax rate
· Remaining room within your target tax bracket
· Realized and unrealized capital gains
· Net Investment Income Tax exposure
· Medicare IRMAA thresholds
· Social Security taxation
· Current traditional IRA balances
· Projected future RMDs
· Expected retirement income
· Future state of residence
· Charitable giving plans
· Estate and inheritance goals
· The source of funds you’ll use to pay the tax
A Roth conversion decision should ideally be based on how all of these pieces interact.
The Bottom Line
A Roth conversion is fundamentally a decision about when you want to pay income tax.
You’re choosing between paying tax today and potentially paying tax later.
The most valuable conversions tend to occur when there is a meaningful difference between those two tax environments.
For some investors, that means filling an unusually low tax bracket after retirement.
For others, it means reducing a large traditional IRA before required minimum distributions begin.
For high-net-worth families, it can also mean shifting assets into a more tax-efficient vehicle for the next generation.
The important question isn’t: “Should I convert my IRA to a Roth?”
It’s: “How much should I convert this year, what will it actually cost, and does paying that tax today improve my long-term financial plan?”
At North Sister Wealth, we believe tax decisions should be evaluated alongside your investments, retirement income, estate plan, and long-term goals. A Roth conversion can be an extremely useful planning tool—but its value comes from getting the timing and the amount right.
This material is for educational purposes only and is not intended as individualized tax, legal, or investment advice. Tax laws and individual circumstances vary. Consult your tax and financial professionals before implementing a Roth conversion strategy.
