How a traditional IRA to Roth IRA conversion works
By Nicolas Straut
Key takeaways
- A Roth conversion carries no income limit and no dollar cap, because the income barrier was repealed for tax years beginning after 2009 and a cap on the amount has never existed.1
- A Roth conversion cannot be undone once the money moves, for any conversion made in 2018 or later, though a regular Roth contribution can still be recharacterized.
- A Roth conversion paid for with outside cash leaves the whole converted balance in the Roth, and withholding the tax from the conversion adds the 10% early-distribution tax before age 59½.
In this article
- What are the Roth conversion rules and limits?
- How much tax will a Roth conversion cost?
- How to work out your Roth conversion break-even rate
- What else a Roth conversion changes on your return
- When you can withdraw converted money from a Roth IRA
- How to do a Roth conversion in 4 steps
- Plan your Roth conversions with the Tweed Roth Conversion Plan
- Frequently asked questions about Roth conversions
Key takeaways
- A Roth conversion carries no income limit and no dollar cap, because the income barrier was repealed for tax years beginning after 2009 and a cap on the amount has never existed.1
- A Roth conversion cannot be undone once the money moves, for any conversion made in 2018 or later, though a regular Roth contribution can still be recharacterized.
- A Roth conversion paid for with outside cash leaves the whole converted balance in the Roth, and withholding the tax from the conversion adds the 10% early-distribution tax before age 59½.
A Roth conversion moves money from a traditional IRA into a Roth IRA and taxes it as ordinary income in the year you do it. There is no income limit and no dollar cap, so you choose to pay tax now at a rate you know, instead of later at one you don't. This guide covers the rules, what the conversion costs, how to find your break-even rate, and what else a conversion changes on your return.
What are the Roth conversion rules and limits?
The Roth conversion rules set no income limit and no dollar cap. You can convert a traditional, rollover, SEP, or SIMPLE IRA, and you can move part of a balance. Converting part of a balance turns a yes-or-no decision into a question of how much.
The $7,500 contribution limit for 2026 applies to new money going into an IRA, and so does the Roth phase-out that runs from $153,000 to $168,000 for single filers. Neither applies to money already inside an IRA moving between accounts. See the Roth IRA guide for how those limits work, and the backdoor Roth IRA guide for how high earners pair a nondeductible contribution with an immediate conversion.
The deadline and what you cannot undo
The deadline for a Roth conversion is December 31, because a conversion counts for the tax year the money moves. That is a different date from the April contribution deadline. A conversion made in January belongs to the new tax year.
A conversion cannot be recharacterized, since the Tax Cuts and Jobs Act repealed that option for tax years beginning after 2017. A regular Roth contribution still can be moved to a traditional IRA before the deadline if your income turns out to disqualify it.
Take any required minimum distribution first. An RMD cannot be rolled over or converted, and converting it creates an excess contribution in the Roth.2 The traditional IRA guide has the RMD ages.
How much tax will a Roth conversion cost?
A Roth conversion costs ordinary income tax on the whole amount you move, stacked on top of everything else you earn that year. There is no separate conversion rate and no capital gains treatment. A large conversion can push part of itself into a higher bracket, so the last dollar you convert is taxed above the first.
If your traditional IRA holds after-tax money, the IRS taxes the conversion proportionally across your pre-tax and after-tax dollars. The measurement runs against your December 31 balance across every traditional, SEP, and SIMPLE IRA you own.3 The backdoor Roth IRA guide walks through that pro-rata calculation and Form 8606.
Where the money to pay the tax comes from
Paying the conversion tax from a taxable account leaves your full converted balance in the Roth. Money paid in tax from outside works like an extra contribution to a tax-free account, without using any contribution room.
Withholding the tax from the conversion is a different transaction, because the withheld amount leaves as a distribution and never reaches the Roth. Under age 59½ that withheld portion also carries the 10% additional tax. Convert $50,000 and withhold $10,000, and a $1,000 penalty lands on money that never reached the Roth.
Withholding counts as paid evenly across the year, which a fourth-quarter estimated payment does not. That is why some people withhold on a late conversion, and it is a trade-off to weigh against the lost Roth balance.
How to work out your Roth conversion break-even rate
Your Roth conversion break-even rate is the future tax rate at which converting and waiting leave you with the same money after tax. Converting comes out ahead when the rate you pay today sits below that rate. When the two rates are equal, the balance alone is a wash.
The table below converts $50,000, grows it at 6% a year for 15 years, and takes the conversion tax out of the IRA. Each cell is what converting leaves you after tax, minus what waiting leaves you.
| Rate you pay now | Rate later: 12% | Rate later: 22% | Rate later: 24% |
|---|---|---|---|
| 12% | Neutral | +$11,983 | +$14,379 |
| 22% | −$11,983 | Neutral | +$2,397 |
| 24% | −$14,379 | −$2,397 | Neutral |
| 32% | −$23,966 | −$11,983 | −$9,586 |
A positive figure favors converting and a negative one favors waiting. The grid is linear, so each percentage point of gap between the two rates is worth $1,198 in this example.
Two things tip an equal-rate case toward converting. Paying the tax from outside funds works like an extra contribution, and every converted dollar shrinks the balance your future required minimum distributions are calculated from.
Your future rate is unknowable, and your rate in retirement is more than one number, because withdrawals fill the standard deduction and the low brackets before they reach your top one. Roth vs traditional IRA runs the same rate comparison for new contributions.
Converting part of a balance each year to fill a bracket
Filling a bracket means converting only enough each year to reach the top of your current tax bracket, then stopping. People use the years between retiring and required minimum distributions, when earned income has stopped and nothing is being forced out of the account yet. The Tweed Roth Conversion Calculator prices one year at a time, so you run it once for each year.
The Tweed retirement withdrawal plan sets each year's conversion together with which account to spend from and when to claim Social Security. The guide to retirement withdrawal order compares five orders for one couple.
Free tool
Price this year's conversion
What else a Roth conversion changes on your return
A Roth conversion raises your income for the year, and several parts of the tax code key off income thresholds. Each effect below sits outside your bracket and can cost more than the bracket does.
How a Roth conversion affects Medicare premiums
A Roth conversion affects your Medicare premiums 2 years later, because Part B and Part D surcharges follow the modified adjusted gross income (MAGI) on the return you filed 2 years earlier. A 2026 conversion sets your 2028 premiums. One dollar over a threshold moves you up a tier for all twelve months, on both parts.
CMS has not published 2028 brackets, so the three 2026 tiers nearest a typical conversion stand in below.4 Expect both the thresholds and the dollar amounts to move before then. The IRMAA brackets page lists every tier and its yearly cost.
| 2026 MAGI (single) | 2026 MAGI (joint) | Part B monthly | Part D surcharge |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 | $0.00 |
| $109,001 to $137,000 | $218,001 to $274,000 | $284.10 | $14.50 |
| $137,001 to $171,000 | $274,001 to $342,000 | $405.80 | $37.50 |
How a Roth conversion affects Social Security taxation
A Roth conversion affects Social Security taxation through provisional income, the measure that decides how much of your benefit is taxable. Conversion income counts toward it. As more of your benefit becomes taxable, each extra converted dollar can carry an effective rate well above your bracket, once benefits have started.
The net investment income tax and the senior deduction
The 3.8% net investment income tax does not apply to the conversion itself, because a retirement distribution is not net investment income. The conversion still raises your MAGI, which can push your other investment income over the threshold. Those thresholds have never been indexed.5
| Filing status | Net investment income tax threshold |
|---|---|
| Single | $200,000 |
| Married filing jointly | $250,000 |
| Married filing separately | $125,000 |
The senior bonus deduction is $6,000 per person aged 65 or over, for tax years 2025 through 2028. A conversion can shrink it, because it phases out at 6% of income above $75,000 for a single filer and $150,000 on a joint return.
The phase-out runs against each person's $6,000, so a joint return is fully phased out at $250,000 whether one spouse is 65 or both.
When you can withdraw converted money from a Roth IRA
Two separate 5-year clocks decide when converted money can come out of a Roth IRA, and your age decides which one matters.
| Qualified distribution clock | Conversion clock | |
|---|---|---|
| Statute | IRC §408A(d)(2)(B) | IRC §408A(d)(3)(F) |
| How many | One per taxpayer | One per conversion |
| Governs | Whether earnings come out tax-free | The 10% additional tax on converted amounts |
| Stops mattering at 59½ | No | Yes |
Over age 59½, the conversion clock no longer applies to you. Under it, each conversion needs 5 years before the converted principal can come out without the 10%, and only the taxable part of a conversion starts that clock. The Roth IRA guide sets out the withdrawal ordering rules.
How to do a Roth conversion in 4 steps
A Roth conversion takes four steps, and the order matters for the first one.
Step 1: Take any required minimum distribution
Take any RMD you owe for the year before you convert. It cannot be converted, and it has to come out first. The RMD calculator gives you this year's amount.
Step 2: Decide the amount
Decide how much to convert, along with whether to convert. Work out the room below your next tax bracket, your next Medicare threshold, and the net investment income tax threshold.
Step 3: Ask the custodian to convert
Ask your custodian to convert. Inside one custodian this is usually a form or an online request, and across two it is a trustee-to-trustee transfer.
Step 4: Pay the tax and file Form 8606
Pay the tax separately, from outside funds where you can, and file Form 8606 with that year's return. Expect a Form 1099-R from the custodian for the year you convert.
Plan your Roth conversions with the Tweed Roth Conversion Plan
The Tweed Roth Conversion Plan shows how much to convert this year to fill the bracket you choose, with the federal tax, the state tax, and the Medicare premium it sets 2 years later. This year's answer is free and runs in your browser.
Free tool
See how much to convert to Roth this year
Frequently asked questions about Roth conversions
I have after-tax money in my traditional IRA. Can I convert just that part?
Converting only the after-tax part of a traditional IRA is not allowed. The IRS treats all your traditional, SEP, and SIMPLE IRAs as one account and taxes every conversion proportionally, using your December 31 balance. The one way around it is to roll the pre-tax money into an employer plan first, which leaves only the after-tax basis behind.
How does a Roth conversion affect an inherited IRA?
A Roth conversion is not available on an inherited traditional IRA for a non-spouse beneficiary. The inherited account also stays out of the pro-rata calculation on your own IRAs, so inheriting a large balance does not change what your own conversion costs. Any after-tax basis in it is tracked on its own Form 8606.
Is there a best time of year to convert?
The best time of year to convert depends on what you know, since timing within the year does not change your tax rate. Converting late in the year means your income is nearly settled. You can then size the conversion against a real income figure and a real threshold instead of a forecast.
Can I convert a 401(k) directly to a Roth IRA?
Converting a 401(k) directly to a Roth IRA is generally allowed once you are eligible for a distribution, which usually means after you leave that employer. The tax treatment matches an IRA conversion. The pre-tax amount counts as ordinary income in the year of the rollover, and you report it on that year's return.
What happens if I convert and the market drops afterward?
If you convert and the market drops afterward, you still owe tax on the value at the moment of conversion. That means paying tax on money you no longer have. Before 2018 you could reverse the conversion by recharacterizing it, and since the repeal you cannot, which is one reason to convert in smaller pieces.
Does a conversion count toward my annual contribution limit?
A Roth conversion does not count toward your annual contribution limit. The $7,500 limit for 2026 governs new money going into an IRA, and a conversion only moves money already inside the system. You can convert and make a full contribution in the same year, with no cap on the amount you convert.
Sources
- https://www.law.cornell.edu/uscode/text/26/408A
- https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras
- https://www.irs.gov/publications/p590a
- https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
- https://www.law.cornell.edu/uscode/text/26/1411
Break-even figures on this page are illustrative and computed from the assumptions stated beside them. The Medicare figures use 2026 IRMAA brackets as a stand-in, because CMS has not published 2028 figures. A conversion cannot be reversed.
Tweed provides educational estimates, not financial advice. Confirm your specific situation with a qualified financial professional.
Personal finance writer, former Forbes contributor and This Week in Fintech writer. He isn't a financial advisor or a CPA.
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