Roth Conversion Planning for Austin Tech Professionals

Austin's tech sector has created a concentration of high-income professionals with uniquely complex compensation structures. Between restricted stock units, incentive stock options, employee stock purchase plans, and traditional salary, the tax picture for a typical Austin tech worker is anything but typical. And with the One Big Beautiful Bill Act (OBBBA) signed into law in July 2025, the tax landscape has shifted in ways that create both new opportunities and new traps for the unprepared.

Sitting underneath all of that complexity is a strategic opportunity that many tech professionals overlook: the Roth conversion. Done well, Roth conversions can meaningfully reduce your lifetime tax burden and build a pool of tax-free retirement income. Done poorly — or not at all — you may end up paying far more in taxes than you needed to.

Here's how to think about it under the current rules.

Why Roth Conversions Matter for Tech Professionals

A Roth conversion is the process of moving money from a traditional (pre-tax) retirement account into a Roth account. You pay income tax on the converted amount now, and in return, the money grows tax-free and can be withdrawn tax-free in retirement.

The core question is straightforward: will your tax rate be higher now or later? If you expect to be in a higher bracket in the future — or if you want to reduce the uncertainty of what future tax rates might look like — converting now locks in today's rate.

For 2026, the 401(k) elective deferral limit is $24,500, with an additional $8,000 catch-up for those 50 and older, and an enhanced $11,250 catch-up for ages 60 through 63. These limits apply to your pre-tax and Roth 401(k) contributions combined, and they set the foundation for how much you can accumulate in tax-advantaged accounts each year.

For tech professionals in Austin, Roth conversions matter more than they do for most people. Your income is often volatile and front-loaded, which creates windows of opportunity that don't exist for someone with a flat salary trajectory. Understanding when those windows open — and being ready to act — is the difference between a good tax strategy and a great one.

The 2026 Tax Bracket Landscape Under OBBBA

The OBBBA permanently extended the Tax Cuts and Jobs Act bracket structure, which means the lower rates that were set to expire are now the law going forward. For 2026, the federal income tax brackets for married filing jointly are:

These brackets are the scaffolding for every Roth conversion decision. The goal is to “fill up” the lower brackets with converted dollars in years when your other income leaves room — without accidentally pushing yourself into a significantly higher marginal rate. Knowing exactly where the bracket boundaries fall is essential to executing this well.

The Income Volatility Opportunity

Tech compensation isn't linear. You might have a year where a large RSU vest pushes your income well into the 35% or 37% bracket, followed by a year where you change companies and your income drops significantly during the transition. Or you might take a sabbatical, get laid off, or start a company — all of which create lower-income years.

Those lower-income years are your Roth conversion window. When your taxable income dips, you have room to convert traditional retirement funds at a lower marginal rate than you'd normally pay. The goal is to fill up the 12%, 22%, or even 24% brackets with converted dollars before your income climbs back up.

This requires planning ahead. By the time you're in the middle of a low-income year, it's often too late to set up the accounts and execute the strategy optimally. The best approach is to have your conversion plan built in advance, with clear triggers for when and how much to convert, so you can move quickly when the window opens.

Watch the New OBBBA Phaseout Interactions

The OBBBA introduced several new deductions and modified existing ones, and Roth conversions can interact with these in ways that aren't immediately obvious.

The new $6,000 senior standard deduction is available to taxpayers 65 and older, but it phases out at higher income levels. If you're near that age and planning conversions, the additional income from the conversion could reduce or eliminate this deduction.

The OBBBA also created deductions for tip income and overtime pay, which have their own AGI-based phaseouts. While these are less likely to affect tech professionals directly, they illustrate a broader point: Roth conversion income increases your AGI, and a higher AGI can phase out deductions and credits you might otherwise receive.

Additionally, the OBBBA introduced a 0.5% of AGI floor on charitable deductions, replacing the prior rules for certain types of charitable giving. If you're a generous giver — and many Austin tech professionals are — a large Roth conversion that increases your AGI could inadvertently raise this floor and reduce the tax benefit of your charitable contributions.

The takeaway: Roth conversions don't happen in isolation. Every dollar you convert ripples through your entire tax return, and under the OBBBA, there are more places where that ripple effect can show up.

The AMT Consideration for ISO Holders

If you hold incentive stock options, the alternative minimum tax is a factor you cannot ignore — and the OBBBA made it significantly more aggressive.

Under the new rules, the AMT exemption phaseout threshold has dropped to $500,000 for single filers and $1,000,000 for married filing jointly, down from $626,350 and $1,252,700 respectively. More significantly, the AMT exemption now phases out at a rate of 50% per dollar of AMT income above the threshold (up from the previous 25%), which creates a much steeper effective marginal tax rate inside the phaseout range. The AMT tax rates themselves remain 26% on the first $244,500 of AMTI and 28% above that.

When you exercise ISOs, the bargain element — the difference between the exercise price and the fair market value — is added to your AMT income. If you're also doing Roth conversions in the same year, that conversion income further increases your AMT exposure. Within the exemption phaseout range, the effective marginal rate reaches 42%(the 26% AMT rate multiplied by 1.5, because every additional dollar of AMTI both gets taxed and reduces the exemption by 50 cents). This ‘bump zone’ applies to single filers with AMT income between $500,000 and $676,200, and to joint filers with AMT income between $1,000,000 and $1,274,000.

This doesn't mean you should never convert in a year when you exercise ISOs. It means you need a precise model that calculates the combined tax cost of both actions together — not in isolation. In some cases, you may already be deep enough into AMT territory that additional conversion income is relatively “cheap.” In other cases, even a small conversion could push you past a phaseout threshold that costs you thousands.

The Capital Gains Bracket Wrinkle

Here's an oddity in the 2026 tax code that most people miss. The 0% long-term capital gains rate applies to taxable income up to $98,900 for married filing jointly. Meanwhile, the 12% ordinary income bracket extends to $100,800. That creates a narrow band — roughly $1,900 — where capital gains are taxed at 15% while ordinary income in the same range is taxed at only 12%.

For most people, this is a trivial difference. But for tech professionals managing large positions of appreciated stock alongside Roth conversions, the ordering of income matters. Roth conversion income (which is ordinary income) stacks on top of your other ordinary income first, and then capital gains sit on top of that. If a conversion pushes your total taxable income past the 0% capital gains threshold, you could end up paying 15% on gains that would otherwise have been tax-free.

The practical lesson: if you're planning to sell appreciated stock and do a Roth conversion in the same year, model both transactions together. The sequence and total amounts matter more than most people realize.

Coordinating Roth Conversions With Equity Comp

This is where things get genuinely complex. If you hold RSUs, ISOs, NSOs, or ESPP shares, each type has its own tax treatment and timing implications. A Roth conversion doesn't happen in a vacuum — it interacts with everything else on your tax return.

The point isn't that Roth conversions are always the right move. The point is that they need to be evaluated as part of a unified tax model — one that accounts for your equity compensation, your base salary, your spouse's income, your deductions, your AMT exposure, and your projected income over the next several years.

Without that unified view, you're guessing. And guessing with six- or seven-figure tax consequences is not a strategy.

The Mega Backdoor Roth

If your employer's 401(k) plan allows after-tax contributions and in-plan Roth conversions (or in-service distributions), you may have access to one of the most powerful wealth-building tools in the tax code: the mega backdoor Roth.

For 2026, the total defined contribution limit — including employee deferrals, employer match, and after-tax contributions — is $72,000. If your plan permits it, you can make after-tax contributions up to that total limit (minus your deferrals and employer match) and then immediately convert those contributions to Roth dollars.

The result: tens of thousands of additional dollars flowing into a Roth account each year, well beyond what a standard Roth IRA contribution would allow. Over a decade-long tech career, this can build a substantial pool of tax-free retirement income that provides enormous flexibility in how you manage taxes and spending in retirement.

Not every employer plan supports this, and the rules around execution matter. But for Austin tech professionals at companies whose plans do allow it, the mega backdoor Roth is one of the highest-value strategies available — and one that surprisingly few people take advantage of.

When to Start

The honest answer is: it depends. But the planning should start now, even if the conversions themselves happen later. The most effective Roth conversion strategies are multi-year plans, not one-time events. They take into account your projected income trajectory, your equity vesting schedule, your expected retirement date, and your goals for how you want to spend and give in retirement.

If you're early in your career and your income is still climbing, you may be in an ideal position to convert now before your brackets get higher. If you're mid-career and earning at your peak, the strategy might be to wait for a transition year or to focus on the mega backdoor Roth instead. If you're approaching retirement, the window may be narrow but still valuable — especially in the years between leaving your employer and beginning Social Security or required minimum distributions.

The worst approach is to do nothing because the decision feels complicated. Every year you delay is a year of potential tax-free growth you don't get back. The OBBBA has made the tax code more complex, but it has also made the permanent bracket structure more predictable. Find an advisor who understands equity compensation, who builds multi-year tax projections, and who can help you act with confidence when the right window opens.