A Roth conversion strategy used to arrive with a deadline attached. For most of the past several years, the planning conversation was organized around a single date: December 31, 2025, when the individual tax rates created by the 2017 Tax Cuts and Jobs Act were scheduled to expire. That deadline no longer exists. The One, Big, Beautiful Bill Act made those rates permanent, and the tax year 2026 figures published by the IRS confirm the new structure. The urgency is gone. The opportunity is not.
The 2026 Sunset That Did Not Happen
Under prior law, the 22 percent bracket was set to revert to 25 percent in 2026, and the 24 percent bracket to 28 percent. A great deal of published guidance still assumes that reversion is coming. It is not. Congress made the seven-rate structure permanent, and the IRS has released the inflation-adjusted 2026 brackets and standard deduction amounts accordingly.
Here is where the two brackets that matter most for conversion planning begin in 2026:
| Rate | Single filer, taxable income over | Married filing jointly, taxable income over |
|---|---|---|
| 12% | $12,400 | $24,800 |
| 22% | $50,400 | $100,800 |
| 24% | $105,700 | $211,400 |
| 32% | $201,775 | $403,550 |
Notice how wide the 24 percent bracket is for a married couple. Taxable income can run from $211,400 all the way to $403,550 before the rate steps up to 32 percent. That flat stretch is the single most useful feature of the current code for anyone planning conversions, and it is now a permanent feature rather than a closing window.
How a Roth Conversion Strategy Actually Works
A conversion moves money from a pre-tax account, such as a traditional IRA, a 403(b), or a 457(b), into a Roth account. The converted amount is added to your ordinary income for that year and taxed at your marginal rate. In exchange, the money grows tax free from that point forward, qualified withdrawals are tax free, and the account is not subject to required minimum distributions during your lifetime.
The entire proposition rests on one comparison: the rate you pay to convert today versus the rate you would have paid on that money later. If your rate later is higher, converting wins. If your rate later is lower, converting loses. Everything else is detail.
One rule deserves emphasis, because it changes how carefully the decision must be made. Since 2018, a Roth conversion cannot be recharacterized. There is no undo. A conversion executed in December is permanent even if your income turns out differently than projected.
Fill a Bracket, Do Not Cross One
The practical technique is called bracket filling. Rather than converting a round number, you estimate your taxable income for the year, identify the top of the bracket you are willing to pay, and convert exactly enough to reach it.
Consider a retired couple in Sacramento with $90,000 of taxable income after deductions. Filling the 22 percent bracket means converting roughly $121,000 to reach $211,400. Whether that is wise depends on what their income looks like once pensions, Social Security, and required distributions are all running. For a household that expects to land in the 24 percent bracket for the rest of retirement, paying 22 percent now is a real gain. For a household that expects the 12 percent bracket, it is a loss.
The Windows That Still Close
Rate permanence removed the legislative deadline. Personal deadlines remain, and they are usually the ones that matter.
The gap years between retiring and claiming
The years after employment income stops and before Social Security and required distributions begin are often the lowest-income years of a person’s life. For a California educator retiring at 60 with a CalSTRS pension but no Social Security claim yet, that gap can run a decade. These years do not come back.
Before required minimum distributions begin at 73
Once required minimum distributions start at age 73, a portion of your pre-tax balance becomes taxable every year whether you need the money or not. Conversions made before that point reduce the balance those distributions are calculated against.
The Medicare surcharge lookback
Medicare premiums are set using your modified adjusted gross income from two years earlier. For 2026, the surcharge begins above $109,000 for single filers and $218,000 for joint filers, on top of a standard Part B premium of $202.90 per month, according to the Centers for Medicare and Medicaid Services. A conversion at age 63 shows up in your age 65 premium. This is a one-year cost rather than a permanent one, but it is frequently overlooked.
The new senior deduction phaseout
For tax years 2025 through 2028, taxpayers age 65 and older may claim an additional $6,000 deduction per person, which phases out above $75,000 of modified adjusted gross income for single filers and $150,000 for joint filers. A large conversion can phase this deduction out entirely, which raises the effective cost of the conversion above the stated bracket rate. This interaction is new, it is temporary, and most conversion calculators do not yet account for it.
Check Your Understanding
A married couple, both age 64, retired last year. This year their taxable income is unusually low. Which single factor most argues against converting a large amount right now? Open each option to see the reasoning.
A. Tax rates are scheduled to rise in 2026, so they should wait.
B. At age 64, the conversion will raise their Medicare premiums at 66.
C. They can undo the conversion later if the numbers look wrong.
D. Low-income years are the wrong time to convert.
Two Mistakes We See Repeatedly
The first is paying the conversion tax out of the converted funds. If you convert $50,000 and withhold $11,000 for taxes, only $39,000 reaches the Roth, and if you are under 59 and a half the withheld amount may also be treated as a distribution subject to penalty. Conversions work best when the tax is paid from a taxable account.
The second is ignoring the pro-rata rule. If you hold any pre-tax IRA balance anywhere, converting after-tax dollars is not a clean, tax-free move. The IRS treats all of your traditional IRA balances as a single pool and taxes the conversion proportionally.
The California Layer
California taxes converted amounts as ordinary income at state rates, and the state has no preferential treatment for retirement income. The combined federal and California cost of a conversion is therefore meaningfully higher than the federal bracket alone suggests. For clients who expect to relocate to a state with no income tax, the question of when to convert becomes a question of where, and the answer often is to wait. For clients who intend to stay in California, that consideration disappears and the analysis returns to bracket management.
Where This Leaves You
A Roth conversion strategy is no longer a race against a legislative clock. It is now an ordinary, recurring planning exercise: look at your projected income each fall, decide whether this year is unusually low relative to your expected future, and convert accordingly. Done consistently over a decade of gap years, a series of modest conversions typically produces a better result than a single large one made under deadline pressure.
If you would like to talk through whether a conversion makes sense for your situation, we offer a free 30-minute call. You can schedule a time here.
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Rooney Wealth Management LLC is an investment adviser registered with the state of California. This article is for educational purposes only and is not tax, legal, or investment advice. Please consult your tax or financial professional regarding your specific situation.
