Roth Conversion Before December 31, 2026: When It Pays, and When It Costs More Than Your Bracket

Short answer: a Roth conversion pays when the tax rate you lock in now is lower than the rate that money would face later, and you can pay the bill from cash outside the IRA. A retired couple with $70,000 of income can move $63,000 into a Roth in 2026 at a flat 12%, for $7,560 of federal tax. It stops paying once the income sets off a side effect. In the wrong spot, a conversion in the 12% bracket really costs 22%, and going one dollar over the ACA subsidy limit can make a $12,601 conversion cost almost 99% of its size. The deadline is December 31, 2026, with no extension and no undo.

Who this is for: US taxpayers with pre-tax money in a traditional IRA or an old 401(k), most often people from their mid-50s to their early 70s, in a year when income is lower than usual. What it does not cover: the mechanics of backdoor and mega-backdoor Roths, inherited IRAs, and in-plan 401(k) conversions, which depend on your plan's rules. All figures are federal unless we say otherwise, and this is general information rather than personal tax advice.

The caseWhat changed, and what did not

A Roth conversion moves money from a pre-tax IRA to a Roth IRA. You pay income tax on it now, and qualified withdrawals later are tax-free. There is no income limit on converting, and the Roth has no required withdrawals during your lifetime.

For years the pitch was "convert before tax rates go up in 2026." That argument is gone: the One Big Beautiful Bill Act made the 10% to 37% rate tables permanent, as Rev. Proc. 2025-32 records. There is no scheduled rate rise to beat. What is left is a personal question: is your bracket this year lower than it will be when this money comes out? Years that often qualify:

• The gap years. You have stopped working, and Social Security and required withdrawals have not started. For a few years, your taxable income may be the lowest it will ever be.
• Before required withdrawals grow. The IRS generally requires withdrawals from a traditional IRA from age 73, and a large balance can push those withdrawals into a higher bracket than you are in today.
• Before one spouse is left alone. A survivor files as single with half the bracket width. On the same $80,000 of taxable income, tax goes from $9,104 on a joint return to $12,312 on a single one, and the top rate on that income from 12% to 22%.
• A dip year. A sabbatical, a business loss or a job change can open bracket room that will not come back.

The methodFill the bracket, stop at the line

Unused room in a bracket does not carry over. If you leave $63,000 of 12% space empty in 2026, you cannot use it in 2027 on top of that year's room.

They are too young for Medicare to matter here: coverage starts in 2031, and the income that counts then is from 2029.

Next year's room will be a little wider. Our projection of the 2027 brackets has every threshold about 3.2% higher, but the IRS had not published the official table when we checked. Several smaller conversions over several years usually beat one large one, because each year has its own low-rate room.

Who pays the taxOutside the IRA or inside it

This choice decides most of the result. We ran Dana and Sam's $63,000 forward 15 years at 6% growth. The $7,560 of cash, if they keep it, grows at 5% in a taxable account after tax drag.

Three things to read from it:

• Paying from inside at the same rate gains nothing. $63,000 × 0.88 = $55,440 in the Roth, which grows to exactly what the taxed IRA would have been. The difference is $0.
• Paying from outside is an extra edge. It wins by $2,401 even at equal rates, because a Roth with no tax drag replaces a taxable account that has some. The advantage grows with the time horizon and with the drag.
• There is a break-even. With these assumptions, converting at 12% and paying from outside loses if your later rate is below 10.41%. If that rate is 10%, you end up $618 worse off, and $3,020 worse off if you paid from the IRA.

Outside cash has its own conditions. If you must sell appreciated shares to raise it, count the capital gains tax on the sale. And under age 59½, tax withheld from the conversion is a distribution, not a conversion: the $7,560 would add $756 in additional tax on top.

When it is a mistakeSix times to leave it alone

• Your rate falls in retirement. Converting $50,000 at 32% while working and withdrawing later at 22% costs $5,000 more than waiting, before any growth. Many high earners do better holding off until their income drops.
• You are moving to a lower-tax state. Most state income taxes follow the federal number, so a 5% state tax adds $3,150 to Dana and Sam's bill. If you plan to move to a state with no income tax, convert afterward. Rules vary: Illinois, for one, lets residents subtract the federally taxed part of a conversion, so check your own state before assuming.
• You will need the money within five years, and you are under 59½. See the 5-year section below.
• The money is going to charity. A charity pays no income tax on an IRA it inherits, so a conversion pays tax that nobody would have owed.
• You cannot pay the tax without tapping the IRA, especially under 59½. As the table shows, that removes most of the benefit.
• It sets off a bigger cost than the bracket. This is the most common error, and it gets its own section.

The real rateWhat the next dollar actually costs

A conversion raises your adjusted gross income, and many other amounts are calculated from that number. So the bracket can understate the cost. Each row below is a separate worked case in 2026 dollars.

How three of those work:

• Capital gains. Gains stack on top of ordinary income, and the 0% rate ends at $98,900 of taxable income on a joint return. A couple with $40,000 of ordinary taxable income and $30,000 of long-term gains pays 0% on the gains. Convert $40,000, and $11,100 of those gains moves to 15%: $1,665 on top of the $4,800.
• Social Security. Up to 85% of benefits can be taxable once half your benefits plus other income passes $44,000 on a joint return. For a couple over 65 with $40,000 in benefits and $52,000 of other income, each $1,000 converted makes another $850 of benefits taxable, so $1,850 of income at 12%. The effect ends when 85% of benefits is already taxable, here at about $56,941 of other income.
• The senior deduction. From 2025 through 2028, people 65 or older get up to $6,000 each, cut by 6% of income over $150,000 on a joint return. Schedule 1-A applies that cut to each spouse's amount, so a couple loses 12 cents of deduction per dollar, and the deduction is gone at $250,000.

MedicareYour 2026 income is on the 2028 bill

IRMAA (income-related monthly adjustment amount) is a surcharge on Medicare Part B and Part D premiums. Social Security normally uses your tax return from two years before the premium year, so a 2026 conversion shows up in 2028. That makes the rule relevant from about age 63, not 65.

IRMAA works in steps, not a slope. One dollar over a line charges the whole tier for the year.

A couple both 67 with $205,000 of income has $13,000 of room below the first line, at 24.64% with the senior deduction effect. If they convert another $20,000, that portion costs $4,928 in tax plus $2,296.80 in surcharge, or 36.12%. Stopping at the line is usually better, unless the conversion is big enough to spread the surcharge thinly.

Three objections deserve a straight answer:

• "These are the wrong thresholds for 2028." True. The lines are indexed to inflation, and the 2028 ones will not be known until late 2027, so today's table errs on the careful side. CMS had not published the 2027 table when we checked; our Medicare guide covers those costs.
• "It is a one-year cost." Also true, and sometimes worth paying. A couple starting at $100,000 who convert $150,000 land in the first tier, and $2,296.80 on that conversion is about 1.5 points. It is the small overshoot that hurts.
• "You can appeal." Only for a listed life-changing event. Social Security's list covers things like death of a spouse, divorce, work stoppage and loss of pension income. A voluntary conversion is not on it.

The MarketplaceThe ACA cliff is back

If you buy your own health insurance, the conversion affects this year's premium tax credit, because the credit is based on 2026 income. The enhanced credits lapsed after 2025. For 2026 coverage the limit is 400% of the 2025 poverty guideline, which is $62,600 for one person and $84,600 for two in the 48 contiguous states. Above that, the credit is zero.

Your benchmark will differ by state and age, so run it with your own numbers. There is also no longer a limit on repayment: the law removed the cap on paying back excess advance credits starting with 2026, so a December conversion that pushes you over the line means returning any advance payments in full at filing. Our ACA guide walks through the 2027 version of the cliff for five households. People at or close to the limit can wait for a year without Marketplace coverage, such as the year Medicare starts, keeping the two-year lookback in mind.

The 5-year ruleTwo clocks, not one

A December 2026 conversion gets credit for the whole year: its clock started on January 1, 2026, so it is clear from January 1, 2031. A 55-year-old who takes $10,000 of it out in 2028 owes $1,000 of additional tax. Withdrawals come out in a set order under IRS Pub. 590-B: regular contributions first, then conversions oldest-first, then earnings. So a person with other Roth contributions can often reach those first.

If you have never had a Roth and are over 59½, the converted amount itself is safe to take out, but earnings are taxable until the Roth clock runs out. A small Roth contribution or conversion this year starts that clock.

No undoWhy December beats November

If Dana and Sam convert $63,000 and the market falls 20% the next week, the Roth holds $50,400 and the tax is still $7,560, which is 15% of what is left rather than 12%. The money can recover inside the Roth, but the extra tax does not come back.

So the usual order is to convert late, once you know the year's income. A December mutual fund distribution, a bonus or a large sale can use up bracket room you thought you had, and after a conversion there is no way to adjust. Converting in two or three pieces also spreads the risk of one bad day. If you hold shares that have fallen, you can convert those shares in kind, without selling them, which moves more future recovery into the Roth for the same tax.

Before December 31The year-end checklist

Next year's decision starts from how much is still pre-tax. The Portfolio Tracker keeps your IRA, Roth and brokerage as separate accounts, so that balance stays visible after each conversion. The retirement calculator shows what those balances need to fund, and the compound interest calculator lets you test our 6% and 15-year assumptions against your own. If you are still deciding what to put in the pre-tax side from here, the 2027 401(k) limits cover the traditional versus Roth contribution question.

Where these numbers come from

• 2026 brackets, standard deduction, age add-on, 0% gains line, permanent rates, repayment cap: IRS Rev. Proc. 2025-32, October 9, 2025.
• Conversions, the no-recharacterization rule, required withdrawals: IRS Pub. 590-A, for 2025 returns, read November 5, 2026; IRS Topic 309 on the absence of an income limit. Five-year rules, ordering, basis: IRS Pub. 590-B and Treasury Regulation 1.408A-6. Age 73: IRS RMD FAQs.
• Medicare: CMS 2026 fact sheet, November 14, 2025; lookback and life-changing events from the SSA operations manual.
• ACA: applicable percentages from IRS Rev. Proc. 2025-25; poverty guideline $15,650 plus $5,500 per person from HHS. Benchmark is the KFF 2026 national average of $625 for a 40-year-old on the CMS age curve, as in our ACA guide; your local price will differ.
• Social Security: IRS Pub. 915. Senior deduction: 2025 Schedule 1-A, Part V. Estimated tax: IRS Pub. 505 and Topic 306. Net investment income tax thresholds: IRS Topic 559; IRC section 1411(c)(5).
• Arithmetic: drafts/roth-conversion-before-year-end-2026-numbers.mjs computes every figure above from the published tables and asserts it.
• Limits and bias: households are illustrative. The 15-year comparison uses a single later tax rate, one growth rate and a lump-sum view, and does not include state tax. A flat later rate favors neither side, but real withdrawals spread over years can sit in lower brackets, which would favor not converting. We also apply no tax when the outside account is sold, which leans slightly the same way, so treat small differences as ties. Using 2026 IRMAA amounts for a 2028 bill overstates how close the line is and understates the surcharge, because the lines are indexed and premiums rise.

FAQFrequently asked questions

What is the deadline for a 2026 Roth conversion?
December 31, 2026. Unlike a Roth contribution, a conversion has no April extension. The year is set by when the money leaves the traditional IRA, and your custodian's own cutoff may be earlier.

Can I undo a Roth conversion if the market falls?
No. Conversions made in 2018 or later cannot be recharacterized. Tax is owed on the amount converted, whatever the account does afterward.

Is there an income limit on converting?
No. Income limits apply to Roth contributions, not conversions, but your income still decides what the conversion costs.

Should I pay the tax out of the conversion itself?
Generally not. At equal rates now and later it gains nothing in our model, and under 59½ the amount withheld also owes 10%. Paying from outside cash is what adds value.

Does a conversion trigger the 3.8% net investment income tax?
Not directly, because IRA distributions are not investment income. But it raises the income figure that tax is tested against. A couple at $240,000 with $20,000 of dividends who convert $30,000 goes $20,000 over the $250,000 line and owes $760, or about 2.53 points on the conversion.

Can I convert my required minimum distribution?
No. If you are 73 or older, you must take the year's required amount first; only what is left can be converted.

Can I convert only the after-tax part of my IRA?
No. All your traditional, SEP and SIMPLE IRAs count as one for this calculation, using their December 31 values. Rolling the pre-tax part into a 401(k) before year-end shrinks the denominator, if your plan accepts rollovers.

Is it worth converting if I am already in the 24% bracket?
Only if you expect a higher rate later or have a specific reason, such as a large balance that will drive required withdrawals, or a surviving spouse who would file as single. Otherwise, the break-even math works against you.

The takeawayConvert to a line, not to a round number

Find your bracket's top, then look for anything closer: the 0% gains line, the Social Security band, the IRMAA step, the ACA limit. Convert up to the first one that matters, pay the tax from outside the IRA, and do it in December when you know your income. If the numbers don't clear your likely rate later, leaving the money where it is costs nothing, and next year's room is a fresh decision. For anything that sits close to a cliff, a tax professional can check your actual return before the money moves.