Yes, Roth conversions are taxable. Every pre-tax dollar you move from a traditional, SEP, or SIMPLE IRA into a Roth IRA is added to your income for the year of the conversion and taxed at your ordinary federal income tax rate.1Internal Revenue Service. Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs) There is no special reduced rate for conversions and no capital gains treatment. In exchange for paying that tax now, the money grows tax-free inside the Roth and comes out tax-free in qualified withdrawals later.
How the Conversion Is Taxed
The IRS treats the conversion as a taxable distribution from your traditional account, even though the money moves directly to the Roth and you never touch it. The converted amount lands on your return as ordinary income, the same category as wages.
Because ordinary income is taxed at progressive rates, a large conversion can push part of your income into a higher bracket. For tax year 2026, single filers face rates from 10 percent on the first $12,400 of taxable income up to 37 percent on income above $640,600; for married couples filing jointly, the 37 percent rate begins at $768,700.2Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Only the portion of your income that falls inside each bracket is taxed at that bracket’s rate, so a $50,000 conversion is not taxed at a single flat rate.
Two boundary points worth knowing. There is no income limit on who can convert, so high earners who cannot contribute directly to a Roth can still convert traditional IRA funds. And the conversion has to be completed by December 31 of the tax year you want it counted in. Unlike regular IRA contributions, there is no extension to the April filing deadline.
When Part of a Conversion Can Be Tax-Free
If you have ever made non-deductible contributions to a traditional IRA, part of your balance is already after-tax money, called your “basis.” That basis moves into the Roth without generating a new tax bill. Everything else—deductible contributions and all investment growth—is pre-tax and taxable when converted.
The Pro-Rata Rule
You cannot cherry-pick only the after-tax dollars to convert. Federal law treats all of your traditional, SEP, and SIMPLE IRAs as a single pool for this calculation.3United States Code. 26 USC 408 – Individual Retirement Accounts Divide your total after-tax basis by the combined December 31 value of all those IRAs. The result is the tax-free percentage of any conversion you make that year.
An example: $10,000 of after-tax basis and $90,000 of pre-tax money across your IRAs means 10 percent of a conversion is tax-free and 90 percent is ordinary income. The ratio applies even if the specific account you convert from was funded entirely with after-tax dollars.
One workaround, if your employer plan accepts incoming rollovers: roll your pre-tax IRA balance into a 401(k) first. Employer plan balances are not counted in the pro-rata calculation, so leaving only after-tax dollars in your IRAs can make a subsequent conversion mostly or entirely tax-free.
Other Taxes a Conversion Can Trigger
The conversion income raises your adjusted gross income, and several other levies are tied to AGI. A conversion that looks affordable at the marginal rate alone can cost more once these ripple effects are counted.
Medicare Premium Surcharges
Medicare sets Part B and Part D premiums based on your modified AGI from two years earlier, so a 2026 conversion can raise your 2028 premiums. For 2026, single filers with income above $109,000 and joint filers above $218,000 pay an additional monthly Part B surcharge ranging from $81.20 to $487.00 per person, or up to $689.90 for joint filers at the highest tier. Part D carries a similar surcharge structure.4Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles The surcharges apply as cliffs, so crossing a threshold by a single dollar bumps you to the next tier for a full year.
Net Investment Income Tax
The 3.8 percent net investment income tax applies once modified AGI exceeds $200,000 (single) or $250,000 (joint), and those thresholds are not adjusted for inflation.5Internal Revenue Service. Questions and Answers on the Net Investment Income Tax Conversion income itself is not classified as net investment income, so the 3.8 percent tax does not hit the converted dollars directly. But if the conversion pushes your AGI past the threshold, the tax then applies to your other investment income—capital gains, dividends, interest, rental income—that would otherwise have sat below the line.
Social Security Benefit Taxation
Conversion income counts toward the “combined income” formula the IRS uses to determine how much of your Social Security benefits are taxable. Single filers with combined income above $25,000 may owe tax on up to 50 percent of benefits, and above $34,000 up to 85 percent. For joint filers, the thresholds are $32,000 and $44,000.6Social Security Administration. Must I Pay Taxes on Social Security Benefits A conversion that crosses either line can make a larger share of your Social Security check taxable for that year. Qualified withdrawals from the Roth later do not count toward combined income.
State Income Tax
Nine states have no individual income tax, so residents there owe nothing at the state level on a conversion. Elsewhere, conversion income is generally taxed as ordinary income at rates that range from below 3 percent to above 13 percent depending on the state and your bracket. Some states offer partial exemptions for retirement income, so the state-taxable amount may differ from the federal figure. Check your state’s rules before you convert.
The Five-Year Rule and Early Withdrawal
The conversion itself does not trigger the 10 percent early distribution penalty, as long as the money moves directly from the traditional account to the Roth. But if you later withdraw converted dollars from your Roth before age 59½ and before five years have passed since that particular conversion, the pre-tax portion of the withdrawal is subject to the 10 percent penalty.
Each conversion starts its own five-year clock on January 1 of the year it happens. Money converted in 2026 meets the requirement on January 1, 2031; money converted in 2027 waits until January 1, 2032. Once you reach 59½, the penalty stops applying to converted amounts regardless of how long they have been in the Roth.
Earnings on those converted dollars follow a separate rule: they are only tax-free and penalty-free once the Roth has been open at least five years and you are 59½ or older.
Take Your RMD First
If you are old enough to owe required minimum distributions from your traditional IRA, you must take the full RMD for the year before converting anything else. The IRS considers the first dollars withdrawn from a traditional IRA in any year to be that year’s RMD, and RMD amounts cannot be rolled into a Roth IRA.7Internal Revenue Service. Retirement Plans FAQs Regarding IRAs Convert an amount that includes your RMD by mistake and the RMD portion becomes an excess Roth contribution, subject to a 6 percent excise tax each year it stays in the account.
The right sequence each year: calculate the RMD, withdraw it and pay the ordinary income tax, then convert whatever additional amount you choose. Converting never satisfies the RMD. Roth IRAs themselves are exempt from RMDs during the owner’s lifetime, so every dollar successfully converted is a dollar that will not generate a future forced withdrawal.
Ways to Shrink the Tax Bill
Spread Conversions Over Several Years
Rather than converting a large balance in one year, many people convert enough each year to fill up their current bracket without spilling into the next one. This keeps the marginal rate on each converted dollar as low as possible and helps you stay under IRMAA, NIIT, and Social Security taxability thresholds. Low-income years, such as early retirement before Social Security starts, are often the best windows for larger conversions.
Use Capital Losses
If you sell investments at a loss in the same year you convert, the losses first offset any capital gains. After that, up to $3,000 of net losses ($1,500 if married filing separately) can be deducted against ordinary income, including the conversion.8Office of the Law Revision Counsel. 26 USC 1211 – Limitation on Capital Losses Anything above $3,000 carries forward. This will not neutralize a large conversion, but it trims the bill at the margin.
Pair a Qualified Charitable Distribution With the Conversion
If you are at least 70½ and have a traditional IRA, you can direct up to $111,000 in 2026 to a qualified charity as a qualified charitable distribution. The QCD counts toward your RMD without adding to taxable income. Doing a QCD and a conversion in the same year lets the charitable transfer subtract from income while the conversion adds to it, easing the net tax hit. This only pencils out if you would have made the charitable gift anyway.
Reporting and Paying the Tax
Your custodian will send Form 1099-R early in the year after the conversion, showing the distribution amount and a code identifying it as a Roth conversion.9Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498 You then file Form 8606 to separate the taxable portion from any after-tax basis. The form asks for the December 31 fair market value of all your traditional, SEP, and SIMPLE IRAs plus your cumulative after-tax basis from prior years.10Internal Revenue Service. Instructions for Form 8606 (2025) The taxable figure from Form 8606 flows to your Form 1040.
Hold on to year-end statements and every prior Form 8606. If you ever made non-deductible contributions but never filed Form 8606 for those years, the IRS can treat your entire IRA balance as pre-tax and tax the whole conversion.
Estimated Tax and Withholding
Conversion income has no payroll withholding attached, so you may need to make estimated tax payments on Form 1040-ES to avoid an underpayment penalty.11Internal Revenue Service. Estimated Taxes The IRS generally charges no penalty if you owe less than $1,000 at filing time, or if you paid at least 90 percent of the current year’s tax or 100 percent of the prior year’s (110 percent if your prior-year AGI exceeded $150,000).12Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
Your custodian will usually offer to withhold taxes from the conversion itself. It is convenient, but every dollar withheld is a dollar that never reaches the Roth and never grows tax-free. Paying the tax from a separate checking or savings account is usually the better long-term move, and, if you are under 59½, withheld amounts can also count as an early distribution subject to the 10 percent penalty.