This article reflects federal rules and general state rules as of June 2026 and covers tax years 2025 and 2026. Tax law changes — confirm current figures before you file.
Quick Answer
You pay no special “conversion tax.” A Roth conversion is taxed as ordinary income in the year you convert. The pre-tax dollars you move are added to your other income and taxed at your marginal rate — between 10% and 37% for 2025 and 2026.
A Roth conversion moves money from a traditional IRA or 401(k) into a Roth account, where it grows tax-free for the rest of your life. The catch is timing: you pay the income tax now, in the year of the conversion, on every pre-tax dollar you move, and that extra income can push you into a higher bracket and trigger costs that have nothing to do with the tax rate itself. There is no income limit and no dollar limit on a conversion, so the amount you owe is entirely in your control — but only if you understand the math before you click “convert.”
The stakes are real and the clock is tight. A conversion is reported in the year the money leaves the traditional account, and the hard deadline is December 31 — not April 15 — so a 2026 conversion must be done by December 31, 2026. According to Vanguard, conversions surged as savers tried to lock in today’s rates before they expected them to rise, and that interest has stayed high even after the 2025 tax law extended the lower rates.
Here is what you will learn:
- 💵 How the conversion is actually taxed, and the exact brackets for 2025 and 2026.
- 🧮 Worked dollar-by-dollar examples you can copy for your own numbers.
- ⚠️ The hidden costs — IRMAA, ACA subsidies, and the pro-rata rule — that surprise people.
- 🗓️ The real deadlines, the form you file, and what happens if you get it wrong.
- 🛡️ The mistakes that turn a smart move into an expensive one, and how to avoid them.
How a Roth Conversion Is Taxed: The Core Rule
A Roth conversion is not taxed at a flat penalty rate or a special “conversion rate.” As Investopedia explains, the converted amount is taxed as ordinary income in the year of conversion. That means the dollars you move stack on top of your wages, pensions, Social Security, interest, and any other income for the year. The IRS then taxes that combined total using the normal bracket system.
This matters because the United States uses a marginal bracket system. You do not pay one rate on your whole income. Instead, each layer of income is taxed at its own rate, and a conversion fills the brackets from the top of your existing income upward. So the real question is never “what rate does a conversion pay?” — it is “what rate does my next dollar of income pay, and how many brackets will this conversion climb through?”
The consequence of ignoring this is overpaying. If you convert a large balance in one year, the top slice of that conversion can be taxed at 32% or 37%, even though your first dollars of income were taxed at 10%. The fix is to spread conversions across several years, converting only enough each year to “fill” a target bracket. That single habit is what separates a planned conversion from an expensive one.
A common misconception is that a conversion is “tax-free because it’s a Roth.” The Roth side is tax-free later. The traditional side you are emptying was never taxed, so the government collects now. What you should do: estimate the tax before you convert, and never convert blind.
What Counts as Taxable in a Conversion
Only the pre-tax portion of your traditional account is taxable when converted. If you made deductible contributions and the account grew tax-deferred, the entire amount is taxable. But if you made nondeductible (after-tax) contributions, you already paid tax on those dollars, so they come out tax-free.
The consequence of getting this wrong is paying tax twice on the same money. To avoid that, you must track after-tax contributions on IRS Form 8606 every year you make one. A reader who skips this form often loses the proof and ends up taxed on dollars that should have been free.
Where the Conversion Income Lands on Your Return
The taxable conversion shows up on your federal Form 1040 as taxable IRA distribution income. Your custodian sends you a Form 1099-R, coded to show a conversion, and you reconcile it on Form 8606. The amount flows into your adjusted gross income (AGI).
This placement is the hidden danger. Because the conversion raises your AGI, it can ripple into Medicare premiums, ACA credits, and the taxation of Social Security — costs explained below. The step to take: model your full return, not just the bracket, before converting.
The 2025 and 2026 Federal Tax Brackets That Apply
Because a conversion is ordinary income, the bracket tables are the heart of the math. The 2025 tax law (the One Big Beautiful Bill Act, or OBBBA) made the lower rates permanent and added an inflation bump for 2026, which H&R Block summarizes here. That change quietly removed the old “convert now before rates jump in 2026” urgency, a shift The Madison Partners describe.
Below are the brackets for both years, drawn from the IRS bracket page and Ameriprise’s 2026 table. Note these apply to taxable income — your income after the standard deduction.
| 2025 Rate | Single Taxable Income |
|---|---|
| 10% | $0 – $11,925 |
| 12% | $11,926 – $48,475 |
| 22% | $48,476 – $103,350 |
| 24% | $103,351 – $197,300 |
| 32% | $197,301 – $250,525 |
| 35% | $250,526 – $626,350 |
| 37% | $626,351 and up |
| 2026 Rate | Married Filing Jointly Taxable Income |
|---|---|
| 10% | $0 – $24,800 |
| 12% | $24,801 – $100,800 |
| 22% | $100,801 – $211,400 |
| 24% | $211,401 – $403,550 (approx.) |
| 32% | next band |
| 35% | next band |
| 37% | top band |
For tax year 2026, the standard deduction rises to $32,200 for married couples filing jointly and $16,100 for single filers. For tax year 2025, it is $30,000 joint and $15,000 single. The standard deduction matters because the income below it is taxed at 0%, which is the cheapest space to convert into.
How to Calculate Your Conversion Tax: A Worked Example
This is the math IRS.gov will not hand you. Take a single filer, Maria, age 45, for tax year 2025. She has $60,000 in wages and wants to convert $40,000 from her traditional IRA. All of it is pre-tax.
First, find her starting taxable income. Wages of $60,000 minus the $15,000 standard deduction leaves $45,000 of taxable income before the conversion. That puts her near the top of the 12% bracket, which ends at $48,475.
Now stack the $40,000 conversion on top. Her taxable income rises from $45,000 to $85,000. The conversion fills the rest of the 12% bracket and then climbs into the 22% bracket:
- $3,475 of the conversion ($45,000 up to $48,475) is taxed at 12% = $417.
- The remaining $36,525 ($48,476 up to $85,000) is taxed at 22% = $8,035.50.
- Total federal tax on the conversion: about $8,452, an effective rate near 21%.
Notice that Maria’s marginal rate is 22%, but her effective rate on the conversion is lower, because part of it landed in the 12% band. If she instead converted only $3,475 this year, the entire conversion would be taxed at 12%, and she could finish the rest next year. That is the bracket-filling strategy in one example.
Backdoor Roth and the Pro-Rata Rule (w/Example)
High earners who exceed the Roth income limits often use a “backdoor” Roth: contribute to a traditional IRA with after-tax dollars, then convert. For tax year 2026 the contribution limit is $7,500, or $8,600 if age 50 or older. The trap is the pro-rata rule.
The pro-rata rule says the IRS looks at all your traditional, SEP, and SIMPLE IRAs combined when deciding how much of a conversion is taxable. You cannot cherry-pick only the after-tax dollars. The taxable share equals your pre-tax balance divided by your total IRA balance.
Here is a worked case from the FreeTaxUSA example: suppose you have $24,000 of pre-tax money and $6,000 of after-tax money, a $30,000 total. After-tax dollars are 20% of the total, so 80% of any conversion is taxable. Convert $6,000 and $4,800 is taxable, while only $1,200 comes out tax-free — not the clean tax-free conversion many expect.
The consequence of ignoring pro-rata is a surprise tax bill in April. The fix some savers use is rolling pre-tax IRA money into a current employer 401(k) first, which removes it from the pro-rata calculation. You track the after-tax basis on Form 8606, filed with your return each year you contribute or convert.
Which Situation Applies to You?
The right amount to convert — and even whether to convert at all — depends on your situation. Find yourself below.
- Pre-retiree in a low-income gap year: You retired but have not started Social Security or Required Minimum Distributions. This is the prime window — convert enough to fill the 12% or 22% bracket.
- High earner doing a backdoor Roth: Your income blocks direct Roth contributions. Read the pro-rata section carefully and clear out pre-tax IRA balances first.
- Retiree on Medicare (age 63+): Watch IRMAA. A conversion two years ago sets today’s premium, so plan before age 63.
- Under age 59½ paying tax from the IRA: Dangerous — money withheld for taxes can count as an early withdrawal with a 10% penalty. Pay the tax from a separate bank account.
- ACA marketplace enrollee: A conversion can slash or erase your premium subsidy. Model the subsidy cliff first.
The Hidden Costs Beyond the Tax Bracket
The income tax is only the headline cost. Because a conversion raises your AGI, it can trigger several other charges that catch people off guard.
The biggest is the Medicare IRMAA surcharge. In 2026 the standard Part B premium is $202.90 a month, but a single filer whose 2024 income topped $109,000 (or $218,000 joint) pays $284.10 or more. A large conversion at age 63 or older can lift premiums two years later, because IRMAA uses a two-year lookback.
A conversion can also make more of your Social Security taxable, raise the 3.8% net investment income tax threshold pressure, and — for those under 65 — slash an ACA premium subsidy. For 2025 and 2026, OBBBA added an extra $6,000 senior deduction for filers 65 and older that phases out at higher incomes, so a big conversion can quietly erase it.
The lesson: model the whole return, including Medicare, Social Security, and any subsidies, not just the bracket. A $5,000 conversion that costs $1,100 in income tax but $2,000 in lost subsidies is a bad deal hiding in plain sight.
Three Common Conversion Scenarios
These three patterns cover most readers. Each shows the move and what it costs.
| Conversion Move | What It Costs You |
|---|---|
| Convert just enough to fill the 12% bracket in a low-income year | Cheapest possible rate; long-term tax-free growth locked in at 12% |
| Convert a large lump sum in a high-income working year | Top slice taxed at 32%–37%, plus possible IRMAA two years later |
| Convert while collecting an ACA subsidy under age 65 | Income tax plus a possible full clawback of the premium tax credit |
| Funding Choice | Resulting Consequence |
|---|---|
| Pay the conversion tax from a taxable bank account | Full converted amount stays in the Roth, growing tax-free |
| Withhold the tax from the IRA itself, under age 59½ | The withheld portion is an early withdrawal, hit with a 10% penalty |
| Timing Choice | Resulting Consequence |
|---|---|
| Spread conversions over several low-income years | Stays in lower brackets, smooths the tax bill |
| Wait until RMDs and Social Security both start | Conversion stacks on top of forced income, often taxed at a higher rate |
Real People, Real Numbers
David and Susan, both 64 and married filing jointly, retired with no wages in 2026. Their only income is $30,000 of interest. After the $32,200 standard deduction, their taxable income is below zero, so they convert $130,000 to fill the 10%, 12%, and most of the 22% bracket — paying roughly $16,000 in tax, an effective rate near 12%. They lock in tax-free growth before Social Security starts.
Priya, a 38-year-old engineer earning $200,000, wants a backdoor Roth. She has $50,000 of pre-tax IRA money, so the pro-rata rule would tax most of her conversion. She first rolls the $50,000 into her 401(k), then contributes $7,500 after-tax and converts it cleanly with almost no tax owed.
Frank, age 56, converts $50,000 but tells his custodian to withhold $11,000 for taxes from the IRA itself. Because he is under 59½, that $11,000 is treated as an early withdrawal and hit with a 10% penalty — a $1,100 mistake he could have avoided by paying from his checking account.
Mistakes to Avoid
- Paying the tax from the IRA under age 59½ — the withheld amount becomes a taxable early distribution with a 10% penalty.
- Converting a lump sum in a high-income year — the top slice can be taxed at 32% or 37%, far more than a phased plan.
- Ignoring the pro-rata rule — a “tax-free” backdoor conversion can turn 80% taxable and create a surprise bill.
- Forgetting Form 8606 — without it, you lose proof of after-tax basis and may be taxed twice on the same dollars.
- Triggering IRMAA at age 63 or older — a big conversion raises Medicare premiums two years later.
- Killing an ACA subsidy — converting while under 65 on a marketplace plan can claw back the entire premium credit.
- Missing the December 31 deadline — a conversion counts in the year the money leaves, not by the April filing date.
- Converting without estimated taxes — a large conversion can trigger an underpayment penalty if you do not pay in during the year.
Do’s and Don’ts
Do’s – Do convert in low-income years — empty gap years between retirement and RMDs are the cheapest space. – Do pay the tax from outside the IRA — it keeps every converted dollar growing tax-free. – Do fill brackets deliberately — stop converting at the top of your target rate. – Do file Form 8606 — it protects your after-tax basis from being taxed again. – Do model Medicare and subsidies — the AGI ripple often costs more than the bracket.
Don’ts – Don’t convert blind — always estimate the full tax first, or you may overpay. – Don’t trigger IRMAA carelessly — watch the two-year lookback starting at age 63. – Don’t forget the pro-rata rule — combine all IRAs before assuming a tax-free conversion. – Don’t wait for RMD years to start — forced income stacks the conversion into higher brackets. – Don’t skip estimated payments — a big conversion without withholding can bring a penalty.
Pros and Cons of a Roth Conversion
Pros – Tax-free growth and withdrawals — qualified Roth distributions are never taxed again. – No required minimum distributions — a Roth IRA has no RMDs during your lifetime, unlike a traditional IRA. – Lock in today’s rates — useful if you expect to be in a higher bracket later. – Tax-free inheritance — heirs receive Roth dollars income-tax-free. – Control over future income — Roth withdrawals do not raise AGI, protecting Medicare and Social Security later.
Cons – Tax due now — you owe income tax in the year you convert. – Possible bracket jump — a large conversion can push you into 32% or 37%. – Hidden costs — IRMAA, ACA, and Social Security taxation can rise with your AGI. – Five-year rule — converted funds withdrawn within five years can face a penalty before age 59½. – No do-overs — recharacterizing a conversion is no longer allowed, so a mistimed conversion is permanent.
Does Your State Tax a Roth Conversion?
Start with the federal rule, then ask the separate question: does my state tax this? Most states with an income tax treat a conversion as taxable income, just like the federal government. So a conversion can carry both a federal and a state bill in the same year.
The amount varies sharply by state. Eight states — including Florida, Texas, Tennessee, and Washington (on wages) — have no broad income tax, so a conversion there costs nothing at the state level. High-tax states like California or New York can add several percentage points on top of the federal bill. A few states also offer retirement-income exclusions that may or may not cover conversions, so the rule genuinely differs by state. Confirm your own state’s treatment with its department of revenue before you convert, because guessing here can cost real money.
What to Do Next
- Estimate your taxable income for the year, before any conversion, including wages, pensions, and interest.
- Pick a target bracket and calculate how much room is left before the next rate kicks in.
- Check the ripple effects — IRMAA if you are 63+, ACA subsidy if under 65, and Social Security taxation.
- Decide the amount and set aside cash outside the IRA to pay the tax.
- Convert before December 31 of the year you want it to count.
- File Form 8606 with your return and keep your 1099-R.
- Call a CPA or fee-only advisor if the conversion is large, you are near a subsidy cliff, or you hold mixed pre-tax and after-tax IRA money — the math gets complex fast, and a professional review usually costs a few hundred dollars but can save thousands.
This article is educational and not a substitute for advice from a licensed tax professional for your specific situation.
FAQs
What rate is a Roth conversion taxed at?
Your ordinary income rate, between 10% and 37% for 2025 and 2026. The conversion stacks on your other income and is taxed marginally, so part may fall in one bracket and part in the next.
Is there a penalty for converting to a Roth IRA?
No. The conversion itself carries no penalty at any age. But if you are under 59½ and use IRA money to pay the tax, that withheld amount is an early withdrawal subject to a 10% penalty.
How much can I convert in one year?
There is no limit. You can convert any amount from a traditional IRA or 401(k) in a single year. The only limit is the tax you are willing to pay on the added income.
Do I pay state tax on a Roth conversion?
Usually yes, if your state has an income tax. States with no income tax, such as Florida and Texas, charge nothing. High-tax states add several points on top of the federal bill.
When is the deadline for a Roth conversion?
December 31 of the tax year. Unlike IRA contributions, a conversion must be completed by year-end to count for that year — there is no April extension.
Can I undo a Roth conversion?
No. Recharacterizing a conversion was eliminated by the 2017 tax law. Once you convert, it is permanent, so estimate the tax carefully first.
What is the pro-rata rule?
It taxes conversions proportionally. The IRS combines all your traditional IRAs and taxes the conversion based on the pre-tax share, so you cannot convert only after-tax dollars tax-free.
Will a conversion raise my Medicare premium?
Possibly. A conversion raises your AGI, and IRMAA uses a two-year lookback. A large conversion at 63 or older can raise Part B premiums above the $202.90 base in 2026.
Should I pay conversion tax from the IRA or from savings?
From savings. Paying from outside the IRA keeps every converted dollar growing tax-free and avoids the 10% early-withdrawal penalty if you are under 59½.
What form reports a Roth conversion?
Form 8606, filed with your Form 1040. Your custodian also sends a Form 1099-R showing the distribution, which you reconcile on your return.
Does a conversion count toward my RMD?
No. You must take your required minimum distribution first, and that RMD cannot be converted. Only amounts above the RMD are eligible to convert.
Is a conversion worth it after the 2025 tax law?
Sometimes. OBBBA made lower rates permanent, removing the “convert before rates rise” urgency. Conversions still help in low-income gap years and for tax-free growth, but the case is less automatic now.
Related reading
- Can You Convert a 401(k) to a Roth IRA? (w/Examples) + FAQs
- Can You Convert Just Part of Your IRA to a Roth? (w/Examples) + FAQs
- Does a Roth Conversion Make Your Social Security Taxable? (w/Examples) + FAQs
- How Does the 5-Year Rule Work on Roth Conversions? (w/Examples) + FAQs
- What Happens If You Can’t Pay the Roth Conversion Tax? (w/Examples) + FAQs
- Do You Owe Estimated Taxes After a Roth Conversion? (w/Examples) + FAQs