Roth Conversions in 2026: Is This the Year to Pull the Trigger?

A Roth conversion can be a useful retirement planning strategy, but it is not automatically a tax-saving move. It generally means moving eligible money from a traditional IRA or workplace retirement plan, such as a 401(k), into a Roth IRA and paying income tax on the taxable portion in the year of the conversion.

For a Roth conversion in 2026, timing matters: the conversion generally counts as income for the calendar year it is completed. If you are considering one before year-end, the key question is not simply whether Roth accounts are attractive. It is whether converting a particular amount fits your tax situation now and your retirement plans later.

Why consider a Roth conversion?

Traditional retirement accounts generally provide a tax benefit when eligible contributions are made, with withdrawals usually taxed as ordinary income. Roth accounts generally work differently: contributions or conversions may be taxable up front, while qualified withdrawals can be tax-free.

A Roth IRA also generally has no lifetime required minimum distributions (RMDs) for the original owner. Converting some traditional retirement savings may therefore offer more flexibility over when you take retirement income and how much taxable income you recognize in future years.

Those features can be appealing if you expect to be in a higher tax bracket later, want to build a source of tax-free retirement income, or want to reduce future RMDs from traditional accounts. But the value of a conversion depends on your complete financial picture, including the tax cost of converting.

Why does the December 31 deadline matter?

A conversion is generally included in income for the calendar year in which it happens, not the year you file the tax return. A conversion completed by December 31, 2026, is generally reported with your 2026 income tax filing. A conversion made in 2027 cannot be counted as a 2026 conversion.

The taxable amount is generally the portion of the converted balance that has not already been taxed. If you have after-tax basis in traditional IRAs, the calculation can be more complicated; IRS rules may require you to consider all your traditional, SEP, and SIMPLE IRAs together. Form 8606 is used to report certain IRA basis and conversion details.

A 401(k) conversion may also depend on your plan’s rules and whether a rollover to a Roth IRA is available. Before moving funds, confirm the account’s options and understand the tax treatment.

Because this decision can affect your 2026 income, planning before year-end gives you a chance to estimate the consequences. Once tax season arrives, tax preparation can report the conversion, but it cannot move it back into the prior year.

When might a conversion make sense?

A conversion may be worth evaluating when your current tax rate is relatively low compared with what you reasonably expect in the future. Some situations to review include:

A lower-income year. A temporary drop in income, a business downturn, or a gap between jobs may create room for a conversion at a lower marginal tax rate.

The years after retirement but before RMDs begin. Some retirees have a period with less income from work and before traditional-account RMDs start. A partial conversion during those years may help manage future taxable withdrawals.

Unused room in a tax bracket. A carefully sized conversion may use part of a lower tax bracket. The U.S. tax system is progressive: crossing into a higher bracket generally does not mean all your income is taxed at that higher rate.

A plan for long-term tax-free growth. If you can pay the conversion tax from funds outside your retirement account and leave the Roth assets invested for the long term, a conversion may fit your goals.

A desire to reduce future RMDs. Converting some assets can reduce the balance in traditional accounts that may be subject to future RMDs.

These are reasons to run the numbers, not guarantees that converting will be beneficial. Future tax rates, investment performance, spending needs, and the length of time assets remain invested all matter.

When could a conversion be the wrong move?

A conversion can increase taxable income substantially. It may be less suitable if:

You would need to use money from the retirement account to pay the conversion tax. Withholding or withdrawing part of the converted funds reduces the amount that reaches the Roth. If you are under age 59½, the amount withheld may also have additional tax consequences.

You expect to need the converted money soon. A Roth IRA has rules governing access to converted amounts and earnings, and early withdrawals can trigger tax or penalties in some circumstances.

The conversion pushes some income into a higher tax bracket or increases other income-based costs. The added income may affect Medicare income-related monthly adjustment amounts (IRMAA), Affordable Care Act (ACA) premium tax credits, or other income-based benefits.

Your tax rate is likely to be lower when you withdraw the money later. Paying tax now at a higher rate may not serve your goals.

You have a large traditional IRA balance or after-tax basis that makes the tax calculation more complex.

For Medicare, a 2026 conversion may affect income used to determine premiums in a later year, often with a two-year lookback. If you have ACA Marketplace coverage, added income may affect your premium tax credit for the coverage year. The exact impact depends on your circumstances and the applicable rules.

Partial conversions and a multi-year strategy

You do not necessarily have to convert an entire traditional account at once. A partial conversion can let you recognize a chosen amount of income while keeping the rest in tax-deferred accounts.

Some taxpayers consider spreading conversions over several years, reviewing income and tax projections each year. This can help manage the amount of additional income recognized annually, but it requires ongoing attention. Your income, deductions, filing status, state taxes, and tax rules can change.

Before deciding on an amount, estimate your projected income for 2026-including wages, business income, investment income, retirement distributions, and any other significant items. Then model how different conversion amounts may affect federal and state tax, Medicare premiums, ACA benefits, and estimated tax obligations.

Remember RMDs and the five-year rules

Traditional IRAs and many employer retirement plans generally require minimum distributions starting at age 73. A required minimum distribution must be taken when due; it cannot be rolled over or converted to a Roth IRA. If an RMD applies to you in 2026, confirm that it is taken before converting additional eligible funds. Read the IRS guidance on required minimum distributions.

Roth IRAs generally do not require lifetime RMDs for the original owner. Beneficiaries may have distribution requirements.

There is also a five-year rule to understand. In general, each conversion has its own five-tax-year period for purposes of the 10% additional tax that may apply when converted amounts are withdrawn early. Separate rules govern when Roth IRA earnings can be withdrawn tax-free. The details depend on your age, account history, and circumstances, so do not assume that every Roth withdrawal is immediately tax- and penalty-free.

For a plain-language overview of conversion rules, see the IRS Roth IRA conversion guidance.

Plan for the tax bill, not just the conversion

Tax on a conversion is generally not automatically withheld at a level that covers your full tax bill. You may need to adjust withholding or make estimated tax payments to avoid an unexpected balance due or a possible underpayment penalty.

Before completing a conversion, decide how you will pay the tax. Paying it with funds outside the retirement account may allow more of the converted balance to remain in the Roth. If you are considering withholding from a retirement distribution, ask how that withholding affects the amount converted and whether it could create additional tax consequences.

Make the decision while there is still time

A Roth conversion is a tax planning decision, not a one-size-fits-all recommendation. The right amount, or whether to convert at all, depends on your current and expected income, retirement timeline, account balances, tax basis, cash available to pay the tax, and the effect on benefits and premiums.

Tax preparation reports what has already happened. Proactive tax planning looks forward and helps you make informed decisions while there is still time to act. At Express Tax Financial Group, we help individuals and business owners review their tax position and plan for upcoming obligations. Our goal is to help clients Save Paper, Save Money, Save Time through informed, year-round decisions.

Visit Express Tax Financial Group or schedule a consultation to discuss your tax planning needs. Current clients can also access the client portal.