Roth IRA Conversion 2026: Should You Convert Before December 31?

A Roth IRA conversion moves money from a traditional IRA (or 401k) into a Roth IRA, triggering income tax on the converted amount now in exchange for tax-free growth and withdrawals forever. The conversion must be completed by December 31 to count for 2026. For many people — especially those with unusually low income this year, those approaching retirement, or those with large traditional IRA balances — 2026 may be an optimal year to convert. Here is how to decide.

The Core Math: When Conversion Makes Sense

A Roth conversion makes sense when your current tax rate on the converted amount is lower than the tax rate you expect to pay on that money in retirement. Simple in theory, complex in execution because nobody knows future tax rates with certainty.

The clearest cases to convert in 2026:

• Your income is unusually low this year — job loss, sabbatical, business slowdown, early retirement gap year. You are in a lower bracket than your long-term average, making this year’s tax cost on conversion lower than average.
• You are in the 12% or lower bracket — converting up to the top of the 12% bracket ($47,150 for single, $94,300 for married) is often advisable regardless of situation because 12% is historically low.
• You have significant traditional IRA assets and expect high retirement income — Required Minimum Distributions from large traditional IRAs can push retirees into higher brackets. Converting gradually now at 22% may be better than being forced to take RMDs at 28-32% later.
• You expect tax rates to rise — the OBBBA locked in current rates through roughly 2033, but if you believe rates will be higher after that, converting now locks in today’s rates.

How Much to Convert

The optimal conversion strategy is to fill up your current tax bracket without pushing into the next one. Calculate how much room you have in your current bracket before the next rate kicks in, and convert up to that amount.

Example: Married filing jointly with $80,000 in taxable income. The 22% bracket runs to $201,050. You have $121,050 of room before hitting 24%. Converting up to $121,050 of traditional IRA assets keeps all conversion income in the 22% bracket. Converting more pushes some into 24%.

The right amount also depends on:

• Medicare IRMAA surcharges — high income triggers higher Medicare premiums. If you are 63 or older, a large conversion in 2026 affects 2028 Medicare premiums (2-year lookback). Run the numbers before converting large amounts.
• ACA premium tax credits — if you are on ACA Marketplace insurance, a large conversion increases MAGI and can reduce or eliminate premium subsidies. This is particularly relevant for early retirees between jobs.
• Net Investment Income Tax — income above $200,000 single/$250,000 married triggers a 3.8% surtax on investment income. Large conversions can push you into this range.

The Mechanics: How to Execute a Conversion

1. Open a Roth IRA if you do not already have one at the same institution as your traditional IRA
2. Contact your IRA custodian (Fidelity, Vanguard, Schwab, etc.) and request a conversion. Most allow this online.
3. Decide what to convert — specific funds, specific dollar amounts, or the entire balance
4. Withhold taxes or pay separately — do not withhold taxes from the conversion itself if you can avoid it. Pay the tax bill from other funds. Withholding from the conversion reduces the amount that ends up in Roth and can trigger early withdrawal penalties on the withheld amount if you are under 59.5.
5. Complete the conversion by December 31 — conversions are irreversible (the re-characterization option was eliminated in 2018)

The Backdoor Roth for High Earners

If your income exceeds the Roth IRA contribution limit ($165,000 single, $246,000 married for 2026), you cannot contribute directly to a Roth IRA. But you can use the backdoor Roth strategy: contribute to a non-deductible traditional IRA and immediately convert to Roth. The conversion is tax-free if you have no other pre-tax IRA funds (the pro-rata rule — verify with your tax advisor if you have existing traditional IRA balances).

The backdoor Roth must also be completed by December 31 for the conversion to count as 2026 income.

If You Have a 401(k): The Mega Backdoor Roth

Some 401(k) plans allow after-tax contributions above the $23,500 pre-tax limit, which can then be converted to Roth within the plan or rolled to a Roth IRA. The total 2026 401(k) limit including after-tax contributions is $70,000. If your plan allows in-service distributions or in-plan Roth conversions, this strategy can shelter up to $46,500 in additional after-tax Roth contributions annually. Check your plan documents or call your plan administrator.

Sources: IRS Publication 590-A; IRS Roth conversion guidance; IRMAA tables 2026. Roth conversion decisions involve complex tax interactions. Consult a tax professional before executing a large conversion. This article is for informational purposes only.