For the better part of a decade, Roth conversion planning was shaped by a single looming deadline: the 2025 sunset of the Tax Cuts and Jobs Act. The conventional advice was simple — convert aggressively while rates were temporarily low, because they were going up in 2026.
That deadline no longer exists.
The One Big Beautiful Bill Act (OBBBA), signed into law in 2025, made the TCJA individual tax brackets permanent. The 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets that were scheduled to revert at the end of 2025 are now the brackets for 2026 and beyond, with annual inflation adjustments.
On the surface, that sounds like good news for conversion planning — no rate cliff, no urgency, more flexibility. And in some ways it is. But OBBBA didn't simply preserve the status quo. It added a new senior deduction, modified the SALT cap, restructured the limitation on itemized deductions for high earners, and adjusted Social Security taxation thresholds. Each of those changes interacts with Roth conversion math in ways that aren't obvious from the headline bracket rates.
The result: in 2026, the difference between a smart conversion and an expensive one isn't the bracket rate you read in a tax table. It's the constellation of phaseouts and thresholds your conversion crosses on the way up. Done well, it's one of the most powerful planning tools available. Done by reflex, it can quietly cost a meaningful chunk of the benefit.
What OBBBA Actually Changed
Before getting to strategy, it's worth being precise about what the law actually does. There are six provisions that drive almost all of the new conversion math.
1. Permanent TCJA Brackets
The seven-bracket structure (10/12/22/24/32/35/37) is now permanent law. For 2026, the 22% bracket for married filing jointly tops out at $206,700 of taxable income; the 24% bracket tops out at $394,600; the 32% bracket tops out at $501,050; the 35% bracket tops out at $751,600; everything above is taxed at 37%. Single brackets are roughly half those thresholds.
The practical consequence for conversion planning is that the “sunset arbitrage” that drove conversions in 2023, 2024, and 2025 no longer applies. There's no automatic 3- to 4-percentage-point rate increase looming. The case for conversions now has to stand on its own merits — bracket arbitrage between today and your retirement years, RMD management, surviving-spouse planning, and estate positioning.
2. Higher Standard Deduction
OBBBA increased the standard deduction beyond what TCJA had set. For 2026, the standard deduction is approximately $32,000 for married filing jointly and $16,000 for single filers (final inflation-adjusted figures vary slightly by year).
A larger standard deduction effectively widens the “0% bracket” on top of which the 10% bracket starts. For someone in early retirement with no Social Security and modest income, this creates more room to convert at very low effective rates — particularly meaningful for households in the gap years between retirement and the start of Social Security or RMDs.
3. The New Senior Deduction
OBBBA introduced an additional deduction for taxpayers age 65 and older — up to $6,000 per qualifying senior, on top of the standard deduction or itemized deductions. The deduction phases out as modified adjusted gross income (MAGI) rises, with the phase-out beginning at $75,000 single / $150,000 married filing jointly and ending around $175,000 / $250,000.
For a married couple where both spouses are 65+, the available deduction can reach $12,000. This is a meaningful dollar number on its own, but the conversion-planning angle is the phaseout: every dollar of conversion income that pushes MAGI through the phase-out range increases the true marginal cost of the conversion above the listed bracket rate. The deduction window itself, however, can be valuable for households who time conversions to fully utilize it.
4. SALT Cap Changes
The original $10,000 SALT (state and local tax) deduction cap under TCJA was increased substantially under OBBBA — up to $40,000 for many filers — but with a phaseout for higher-income taxpayers. The cap returns to $10,000 for filers above the upper income threshold.
For Texas residents this is less consequential than for high-tax-state filers, since Texas has no state income tax. But for property-tax-heavy filers (large homestead, ranch property, multiple properties), the SALT phase-out is a real consideration. A Roth conversion that pushes income through the SALT-cap phaseout creates yet another hidden marginal tax cost beyond the headline bracket.
5. Itemized Deduction Limitation for Top-Bracket Filers
OBBBA reintroduced a limitation on the value of itemized deductions for taxpayers in the top 37% bracket, effectively capping the benefit of those deductions at a 35% rate. The practical implication is that for very-high-income filers, the marginal benefit of charitable giving and large itemizations is reduced relative to the bracket rate.
For Roth conversion planning, this matters when conversions push income into the 37% bracket: the value of offsetting that income with itemized deductions (especially charitable contributions) is structurally diminished compared to prior law. It strengthens the case for sequencing conversions in years when the taxpayer is below the 37% threshold and using charitable bunching strategies in different years.
6. Social Security Taxation Thresholds
The thresholds at which Social Security benefits become partially taxable were not meaningfully indexed under OBBBA, meaning more retirees will see their benefits taxed each year. For retirees who have already begun Social Security, additional ordinary income from a Roth conversion can push previously-untaxed Social Security benefits into the 50% or 85% taxable range — a phenomenon sometimes called the “Social Security tax torpedo.”
The torpedo creates effective marginal rates on conversion income that can reach 40.7% (for someone in the 22% bracket with each conversion dollar pulling 85 cents of benefit into taxable income at 22%) or higher when stacked with IRMAA. This is a primary reason the largest conversions are often best done beforeSocial Security claims begin — a topic we explore in detail in our piece on Social Security claiming strategies for married couples.
The Phaseout Minefield: Why the Bracket Rate Lies
The single most important concept in 2026 Roth conversion planning is the gap between the statutory bracket rate and the effective marginal rate a conversion actually triggers.
When a conversion adds $100,000 of ordinary income, the first-order tax cost is the bracket the income lands in — say, 24%. But that's only the start. The same $100,000 may also:
- Phase out part or all of the senior deduction
- Push the SALT cap from $40,000 down toward $10,000
- Cross IRMAA thresholds and increase Medicare premiums two years later
- Make additional Social Security benefits taxable (if applicable)
- Push capital gains from the 0% LTCG bracket into 15%, or 15% into 20%
- Trigger or expand the 3.8% Net Investment Income Tax
- Limit the QBI deduction (relevant for pass-through owners — see our note on the QBI deduction under OBBBA)
- Phase out the new car loan interest deduction and other OBBBA-era benefits
Stack a few of those together and a conversion that looks like a 24% transaction can have an effective marginal cost of 30%, 35%, or even higher. The headline bracket simply isn't the right number to optimize against.
The right framework is to model the household's entire tax picture — brackets, phaseouts, capital gains, NIIT, IRMAA, Social Security taxation — at multiple conversion sizes and find the size where the next dollar of conversion income costs less than your projected future marginal rate. That dollar amount is the right size, not whatever fills a particular bracket.
Where the Real Opportunities Are in 2026
Despite the new complications, OBBBA preserved — and in some cases enhanced — the situations in which Roth conversions are unusually valuable. These are the windows worth planning around.
The Pre-Social Security Gap Years
For retirees between roughly 60 and 70 who have stopped earning W-2 income but haven't yet started Social Security or required minimum distributions, the household's taxable income is often dramatically lower than it will be once benefits and RMDs begin.
These “gap years” are typically the single best window for large conversions. Without Social Security in the picture, the tax torpedo is moot. Without RMDs, you control every dollar of taxable income. And under OBBBA's larger standard deduction, the first slice of conversion income is effectively tax-free, with the next slice taxed at 10% and 12% before reaching 22%.
For many Hill Country and Texas-based clients, this is where the bulk of lifetime conversion happens — not in the years before retirement, and not after RMDs start, but in the relatively brief window in between.
Filling the 24% Bracket
For households whose projected RMD-era marginal rate is 32% or higher (driven by large pre-tax balances, pensions, rental income, or both spouses' Social Security benefits), filling the 24% bracket today is often a high-confidence move.
For 2026, that means converting up to roughly $394,600 of taxable income for a married filing jointly couple (approximately $197,300 for single). The 24% bracket is unusually wide, and the jump to 32% is a significant cliff. Households with the discipline to stop precisely at the 24% ceiling capture the spread without paying for over-conversion.
Low-Income Years (Sabbaticals, Career Transitions, Bad Business Years)
Any year in which a household's ordinary income drops meaningfully — a sabbatical, a year between jobs, a transition to consulting, a slow year for a business, a business launch year with startup losses — is an opportunity for accelerated conversion at unusually low rates.
These windows are often missed because they aren't visible until tax-filing season. Proactive year-end planning — a December projection, a final conversion before year-end — captures opportunity that retroactive planning cannot.
The RMD Squeeze
For households with $2M+ in pre-tax retirement balances at age 73 (the current SECURE 2.0 RMD age), required distributions can quickly push taxable income into the 32%, 35%, or 37% brackets — even before any conversion is considered. Conversions before the RMD age effectively shrink the future RMD base and reduce the lifetime tax cost of the pre-tax balance.
The math here is unusual: a conversion at 24% today can save 35% later if the alternative is a forced RMD that lands in the 35% bracket. Multiplied across decades and large balances, the difference can run into seven figures.
The Senior Deduction Window
For taxpayers age 65+ whose income lands below the senior deduction phaseout, the OBBBA senior deduction is a meaningful new lever. A married couple where both spouses are 65+ may have an additional $12,000 of deduction available — but only if MAGI stays below the upper phaseout.
The planning move is to size conversions to fully use the deduction without phasing it out. That often means smaller, steadier conversions in the senior-deduction years, rather than one large conversion that loses most of the deduction value to the phaseout.
The Widow Tax Trap
Perhaps the most under-appreciated reason to convert is the shift from married-filing-jointly to single-filer brackets after the death of a spouse. The single brackets are roughly half the dollar width of the joint brackets, while income (RMDs, pensions, surviving Social Security benefit) often doesn't fall by half.
The result is that a surviving spouse can land in a materially higher bracket on the same household income they had before. IRMAA also tightens because single-filer thresholds are lower. For a couple where one spouse is in poorer health, accelerating conversions during the joint years — even if the marginal rate is similar — can lock in lower future rates for the survivor.
This is a planning question that almost no one raises on their own, but it's often the single largest source of avoidable tax in a multi-decade plan.
When Conversions May Be Less Valuable
Roth conversions aren't universally beneficial. There are a handful of situations where the math is weaker or actively unfavorable.
Strong Charitable Intent (QCDs)
For households age 70½ and older who plan to give meaningfully to charity each year, qualified charitable distributions (QCDs) from a traditional IRA effectively transfer pre-tax dollars to charity at a 0% tax rate — the QCD doesn't count as taxable income, the IRA balance reduces, and the dollars go to the charity untaxed.
For a household that will give, say, $30,000/year to charity over 20 years, that's $600,000 of pre-tax dollars flowing out at 0% tax. Converting those same dollars to Roth at any positive rate is mathematically worse than giving them through QCDs. The right strategy is to preserve enough pre-tax balance to fund planned QCDs and convert only the excess.
Heirs in Lower Brackets Than You
Inherited traditional IRAs are taxed at the heir's ordinary income rate over the SECURE Act 10-year distribution window. If your heirs are reliably in lower brackets than you (younger children just starting careers, for example), converting at your higher rate to spare them their lower rate is a losing trade.
The opposite case — high-earning adult children who will inherit during their peak income years — is the more common reality and tilts the math toward conversion. The point is simply that the calculation depends on whose rate you're actually arbitraging.
You Can't Pay the Tax from Outside Funds
Roth conversions work because every dollar converted lands in a tax-free account that grows untaxed for life. If the conversion tax has to come out of the IRA itself, the effective dollars converted shrink, the long-term compounding shrinks with it, and (if you're under 59½) you may pay a 10% early-withdrawal penalty on the dollars used to pay tax. The strongest conversions are ones funded with separate taxable cash. If that cash doesn't exist, the conversion size should usually shrink to match.
Conversion Mechanics: Five-Year Rules and Timing
The mechanics of executing a conversion are straightforward in theory but easy to mishandle. A few rules that matter:
The Two Five-Year Rules
Roth IRAs have not one but two five-year rules, and confusing them is one of the most common conversion mistakes.
The Roth IRA five-year rule applies to all Roth IRAs and starts the year you make your first contribution or conversion to anyRoth IRA. Once five tax years have elapsed and you're 59½ or older, all earnings come out tax-free. This clock starts once and doesn't reset.
The conversion five-year rule applies separately to each conversion and only matters for taxpayers under 59½. For five tax years following each conversion, the converted amount can't be withdrawn without a 10% penalty (income tax was already paid at conversion, so no income tax applies, but the penalty does). Once you're 59½, this rule is moot.
For most retirees, the second rule is irrelevant; for early retirees in their 50s building a Roth ladder, it dictates the timing of every dollar.
Timing the Conversion Within the Year
Conversions can be done any time during the calendar year. The case for early-in-year conversion is that any growth from January 1 onward happens in the Roth, not the traditional account — tax-free growth from the earliest possible date. The case for late-in-year conversion is precision: by November or December, the household's actual taxable income is largely known, and the conversion can be sized exactly to the chosen bracket or phaseout edge.
For households with stable income, an early-year conversion with a small year-end true-up is often optimal. For households with variable income (business owners, equity compensation, capital gain realizations), waiting until December produces more accurate sizing.
Recharacterization Is Gone (Mostly)
TCJA eliminated the ability to undo a conversion through recharacterization, and OBBBA didn't restore it. Once a conversion is processed, it's permanent. There is no do-over if the market drops, no reversal if the household ends up in a higher bracket than expected, no opportunity to retroactively shrink a conversion that turned out to be poorly timed.
The practical implication is that conversion sizing deserves real care. Multiple smaller conversions across the year are easier to manage than one large conversion that can't be unwound. Many planners now use a sequence of quarterly or semiannual conversions, sized against the evolving income picture.
Estimated Tax Payments
Conversion income generates real tax liability that must be paid by federal estimated tax deadlines (or through withholding) to avoid underpayment penalties. The cleanest approach is to pay the conversion tax through estimated payments funded from a taxable account. Withholding the tax from the conversion itself shrinks the amount that actually reaches the Roth, so it's generally avoided when outside cash is available.
Common Questions
Did OBBBA eliminate the 2025 TCJA sunset?
Yes. The One Big Beautiful Bill Act made the 2017 TCJA individual tax brackets permanent rather than letting them sunset back to pre-2017 rates at the end of 2025. The 10%, 12%, 22%, 24%, 32%, 35%, and 37% brackets remain in place for 2026 and beyond, with annual inflation adjustments. This removes the urgency many planners felt to convert aggressively in 2024 and 2025 ahead of a forced rate increase — but it does not remove the case for conversions, because OBBBA also added new phaseouts and deduction limits that change the math.
How much should I convert to Roth in 2026?
There is no universal answer. The right conversion size depends on your current marginal bracket, your projected bracket in retirement, whether you're in a Medicare IRMAA tier, whether you're a Social Security recipient, whether you qualify for the new senior deduction, and your projected required minimum distributions. A common starting point is to fill the 24% bracket if your projected retirement bracket is higher — but the new OBBBA phaseouts can make the true marginal cost of a conversion materially higher than the bracket rate suggests. The right size is whatever keeps your effective marginal cost below your expected future rate.
Should I pay the conversion tax from the IRA or from a separate account?
Pay the tax from a separate taxable account whenever possible. Using IRA dollars to pay the tax shrinks the amount that gets converted, defeats much of the long-term compounding benefit, and — if you're under 59½ — triggers a 10% early-withdrawal penalty on the dollars used to pay tax. Conversions are most valuable when 100% of the converted amount lands in the Roth and the tax is paid with outside funds.
Are backdoor Roth conversions still allowed under OBBBA?
Yes. OBBBA did not eliminate the backdoor Roth IRA strategy. High earners can still make a nondeductible contribution to a traditional IRA and then convert it to a Roth IRA. The pro-rata rule still applies, so taxpayers with significant pre-tax IRA balances should plan carefully. The mega-backdoor Roth (after-tax 401(k) contributions converted in-plan) also remains available where the employer plan permits it.
How does a Roth conversion affect my Medicare premiums?
Roth conversions count as ordinary income and can push you into a higher Income-Related Monthly Adjustment Amount (IRMAA) tier, which raises your Medicare Part B and Part D premiums two years later. Each IRMAA tier you cross adds roughly $900–$5,000+ per person per year in additional premiums depending on the tier. For married couples, both spouses pay the higher premium, so the dollar impact doubles. IRMAA effectively acts as a hidden marginal tax on conversions for anyone age 63 or older (since 2026 conversions affect 2028 premiums).
Is it ever too late to convert?
Rarely, but the math gets harder once Social Security and RMDs are both flowing. After RMDs begin at age 73, every conversion stacks on top of mandatory income, which often means stacking on top of an already-high IRMAA tier. Conversions are still possible after that point and can still make sense in specific cases (widow planning, charitable bunching years, large medical deduction years), but the easy windows are mostly behind. The strongest planning happens in the decade leading up to RMD age.
The Bigger Picture
Roth conversion planning under OBBBA is fundamentally a tradeoff between certainty and flexibility. Permanent brackets remove one major source of urgency. New phaseouts and deductions add new layers of complexity. The senior deduction creates a new window. The SALT and itemized deduction changes affect a narrower band of high earners. The Social Security tax torpedo remains, and IRMAA remains the silent killer of imprecise conversions.
None of this is unique to taxes. The deeper question is what role tax-deferred and tax-free balances play in the life you're actually trying to build — the kind of question the conversion math can't answer on its own. We've written about why we anchor planning in that question first in our piece on the Statement of Financial Purpose.
The right approach in 2026 isn't to convert aggressively because rates might rise, or to skip conversions because the sunset is gone. It's to model the household's full multi-decade tax picture — brackets, phaseouts, IRMAA, Social Security, RMDs, survivor scenarios, charitable intent — and convert the dollars where the today-vs-future spread is largest, in the years where the spread is largest, sized to the effective marginal rate rather than the bracket rate.
Done that way, conversions stop being a single decision and become an ongoing annual conversation — one of the small handful of planning levers that can change a retirement's trajectory by hundreds of thousands or millions of dollars over time.