Here’s how a Roth conversion works in one sentence: you move money from a pre-tax account, like a traditional IRA or 401(k), into a Roth IRA, pay income tax on the converted amount now, and in exchange qualified withdrawals later are tax-free. There’s no income limit on conversions, so anyone with a pre-tax account can do one. The real question is whether paying tax today will save you more than it costs.
Also, this guide covers the mechanics, the tax math, the rules that catch people off guard, and how to decide.
What a Roth Conversion Is
A Roth conversion is a transfer from a traditional IRA, SEP IRA, SIMPLE IRA, or eligible employer plan into a Roth IRA. However the untaxed portion of the amount you convert is added to your income for the year (IRS IRA FAQs).
Three facts frame everything else:
- No income limit. Since 2010, there are no income or filing status limits on conversions (IRS). That’s different from direct Roth IRA contributions, which phase out at higher incomes.
- No dollar limit. You can convert $5,000 or $500,000. The annual IRA contribution limit doesn’t apply.
- No undo button. Conversions made after 2017 can’t be recharacterized (reversed) (IRS IRA FAQs). Once it’s done, the tax is owed.
How a Roth Conversion Works, Step by Step
- Open a Roth IRA if you don’t have one, ideally at the same firm that holds your traditional IRA.
- Request the conversion. Also most custodians handle it as a direct transfer. You can convert cash or move investments in kind without selling them.
- Decide on withholding. You can usually elect to have tax withheld, but withheld money isn’t converted (more on that below).
- Report it at tax time. Your custodian sends Form 1099-R, and you report the conversion on Form 8606 (IRS Form 8606 instructions).
- Pay the tax through withholding or estimated payments. Converting late in the year can leave you short on estimated taxes if you don’t plan for it.
Conversions are counted by calendar year, so a conversion must be completed by December 31 to count for that tax year.
How a Roth Conversion Is Taxed
The converted amount is taxed as ordinary income at your regular rates, on top of everything else you earn. However it isn’t a separate tax. That makes your marginal tax bracket the key number.
| Conversion amount | Tax if it all falls in the 12% bracket | 22% bracket | 24% bracket | 32% bracket |
| $10,000 | $1,200 | $2,200 | $2,400 | $3,200 |
| $25,000 | $3,000 | $5,500 | $6,000 | $8,000 |
| $50,000 | $6,000 | $11,000 | $12,000 | $16,000 |
Federal tax only, for illustration. A large conversion can push part of the income into a higher bracket, and state income tax may also apply.
Because of this, many people convert in stages over several years, filling up a lower bracket each year rather than converting everything at once.
The Rules That Trip People Up
The pro-rata rule
If you have both pre-tax and after-tax (nondeductible) money in your IRAs, you can’t choose to convert only the after-tax dollars. The IRS looks at all of your traditional, SEP, and SIMPLE IRAs together, and each conversion is taxable in proportion. In one IRS example, someone with a $10,000 nondeductible IRA and a $30,000 deductible IRA finds that 75% of a conversion is taxable (IRS). The calculation is done on Form 8606. This rule is also why our guide on how to do a backdoor Roth contribution recommends checking your other IRA balances first.
The 5-year rules
Two different five-year clocks apply to Roth IRAs (IRS Publication 590-B):
- For earnings to be tax-free, a distribution must be “qualified,” which generally means the Roth IRA has been open for five years and you’re 59½ or older (or meet another exception).
- For each conversion, if you’re under 59½ and withdraw converted amounts within five years, the 10% additional tax can apply to the part of the conversion that was taxable, unless an exception applies.
If you’re 59½ or older, the conversion clock is generally not a concern, but the five-year rule for earnings still is.
RMDs can’t be converted
If you’re subject to required minimum distributions, you must take your RMD for the year before converting. The RMD amount itself can’t be converted (IRS). Our article on required minimum distribution rules for 2026 explains how the RMD is calculated.
Withholding from the conversion
If you have tax withheld from the conversion, the withheld amount is treated as a regular distribution, not converted. If you’re under 59½, that amount can also face the 10% early withdrawal penalty. Paying the tax with cash from outside the IRA keeps more money growing tax-free.
The Hidden Costs of a Bigger Income Year
The conversion raises your adjusted gross income, which can affect other parts of your tax picture:
- Medicare premiums (IRMAA): Medicare Part B and Part D premiums are based on income from two years earlier. In 2026, surcharges start above $109,000 of modified AGI for single filers and $218,000 for joint filers (SSA). A conversion at 63 or older can raise premiums two years later.
- Taxation of Social Security: Higher income can make up to 85% of your benefits taxable (IRS Publication 915).
- Deduction phase-outs: The new senior deduction of up to $6,000 per person begins phasing out at $75,000 of modified AGI ($150,000 joint) (IRS).
- Health insurance subsidies: If you buy Marketplace coverage, extra income can reduce your premium tax credit.
Our guide to retiree taxes in 2026 covers how these pieces interact.
When a Roth Conversion Tends to Make Sense
| Usually favors converting | Usually favors waiting |
| You expect a higher tax rate later | You expect a lower tax rate in retirement |
| You’re in a low-income year (job gap, early retirement, business loss) | The conversion would push you into a much higher bracket |
| You can pay the tax from non-retirement savings | You’d have to use IRA money to pay the tax |
| You won’t need the money for 5+ years | You need the money soon |
| You want to reduce future RMDs or leave tax-free money to heirs | The added income would trigger IRMAA or lose a credit |
The “gap years” between retirement and the start of Social Security and RMDs are often a good window, because taxable income may be unusually low.
Frequently Asked Questions
Do I pay taxes when I convert to a Roth IRA?
Yes. The pre-tax portion of the amount you convert is added to your taxable income for that year and taxed at your ordinary income rates.
Is there an income limit for a Roth conversion?
No. Since 2010, anyone can convert, regardless of income or filing status. Income limits apply only to direct Roth IRA contributions.
Can I undo a Roth conversion?
No. Conversions made after 2017 can’t be recharacterized, so make sure you can afford the tax before you convert.
How much should I convert each year?
Many people convert just enough to fill their current tax bracket without crossing into the next one or an IRMAA threshold. The right amount depends on your full tax picture.
Does a Roth conversion count as an early withdrawal?
Not by itself. But if you’re under 59½, withdrawing converted funds within five years, or having tax withheld from the conversion, can trigger the 10% additional tax.
Let’s Run Your Numbers
Understanding how a Roth conversion works is the easy part. Deciding how much to convert, and when, depends on your brackets, Medicare timeline, and Social Security plans. To build a multi-year conversion plan, book a free consultation with Aric.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.