There is no federal cap on Roth conversion limits: you can convert any amount from a Traditional IRA, SEP IRA, SIMPLE IRA, or employer plan like a 401(k) into a Roth IRA in a single year, and no income ceiling blocks you from doing it. $5,000 or $5 million, the IRS treats both the same. What constrains you is the tax bill. Every pre-tax dollar you convert becomes ordinary income for that year, and the knock-on effects on your bracket, your Medicare premiums, and investment surtaxes often cost more than people expect.
No Dollar or Income Limit Applies
Direct Roth contributions are capped and income-tested. For 2026, the ability to contribute directly phases out between $153,000 and $168,000 of modified AGI for single filers, and between $242,000 and $252,000 for married couples filing jointly.1Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Earn above those ranges and you cannot put a dollar directly into a Roth.
Conversions play by different rules entirely. The IRS applies no income limit and no dollar cap to the amount you convert into a Roth IRA.2Internal Revenue Service. Retirement Topics – IRA Contribution Limits A taxpayer earning $50,000 and one earning $5 million have the same access. You can also do as many conversions as you want in a single year, which is useful if you want to break a large balance into smaller pieces and watch where each one lands in your bracket.
This is also what makes the “Backdoor Roth” possible for high earners who are shut out of direct contributions: a non-deductible Traditional IRA contribution, followed by an immediate conversion. The strategy works cleanly only when you have no other pre-tax IRA balances, because of the pro-rata rule covered below.
How the Converted Amount Gets Taxed
The converted amount is added to your ordinary income for the year. Convert $80,000 while already earning $120,000, and your taxable income climbs to at least $200,000 before deductions. That spike can push you into a higher federal bracket, and the conversion is taxed at whatever marginal rates apply to your total income.
The portion that escapes tax is your basis: the total of any non-deductible contributions you’ve made to Traditional IRAs over the years. Because that money was already taxed, the IRS doesn’t tax it again. You track basis by filing Form 8606 for each year you make a non-deductible contribution.3Internal Revenue Service. About Form 8606, Nondeductible IRAs If you never filed the form, the IRS assumes your basis is zero and treats every converted dollar as taxable.
The taxable portion goes on line 4b of your Form 1040, reported through Part II of Form 8606.4Internal Revenue Service. Form 8606 – Nondeductible IRAs One useful quirk: the conversion itself does not trigger the 10% early withdrawal penalty, even if you are under 59½, because it qualifies as a rollover.5Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
The Pro-Rata Rule
You cannot pick which dollars to convert. If your Traditional IRA holds a mix of deductible and non-deductible contributions, the IRS treats every distribution, including a conversion, as coming proportionally from both pools. This is the pro-rata rule, and it quietly derails a lot of conversion planning.
The math: divide your total non-deductible basis across all Traditional, SEP, and SIMPLE IRAs by the combined fair market value of those accounts as of December 31 of the conversion year. The result is the tax-free percentage of whatever you convert.6Internal Revenue Service. Publication 590-B, Distributions From Individual Retirement Arrangements (IRAs) Form 8606 walks the calculation line by line.4Internal Revenue Service. Form 8606 – Nondeductible IRAs
Say you have $10,000 of non-deductible basis and $90,000 of pre-tax money across all your non-Roth IRAs. Only 10% of any conversion is tax-free. Convert $20,000 and you owe tax on $18,000; the other $2,000 is a return of basis. The IRS aggregates balances across every custodian you use, so a $200,000 rollover IRA sitting somewhere you forgot about will shrink the tax-free slice of a Backdoor Roth to almost nothing. The common fix is to roll existing pre-tax IRA money into your current employer’s 401(k) before converting, since 401(k) balances are excluded from the pro-rata calculation.
The Secondary Costs People Miss
A large conversion doesn’t only raise your income tax. It can trigger two additional costs that catch converters off guard.
Medicare IRMAA Surcharges
Medicare Part B and Part D premiums are income-adjusted. Cross certain modified AGI thresholds and you pay the Income-Related Monthly Adjustment Amount. The 2026 standard Part B premium is $202.90 per month, but a joint income above $218,000 raises it to $284.10, and the surcharges escalate from there, reaching $689.90 per month at or above $750,000.7Centers for Medicare & Medicaid Services. 2026 Medicare Parts A & B Premiums and Deductibles For single filers, the first surcharge begins above $109,000.
The timing is the trap. Medicare uses your tax return from two years prior, so a conversion in 2026 can raise your 2028 premiums. If you are already on Medicare or close to 65, model the two-year lag before converting.
The 3.8% Net Investment Income Tax
The Net Investment Income Tax adds 3.8% on top of regular income tax when modified AGI exceeds $200,000 for single filers or $250,000 for joint filers.8Office of the Law Revision Counsel. 26 U.S. Code 1411 – Imposition of Tax It applies to the lesser of your net investment income or the amount your AGI exceeds the threshold. The conversion itself isn’t investment income, but the AGI boost it creates can expose capital gains, dividends, and interest that would otherwise have stayed below the line. Someone with $150,000 in wages and $60,000 in investment income normally owes no NIIT. Add a $100,000 conversion and their AGI hits $310,000, suddenly subjecting the investment income to the surtax.
RMDs Must Come Out First
If you have reached the age for required minimum distributions, you must take the full RMD for the year before converting anything else. RMD amounts cannot be rolled over into a Roth or any other tax-deferred account.9Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Convert without first satisfying the RMD and the IRS treats the RMD portion as an ineligible rollover, which creates penalties and a cleanup problem.
In practice your conversion year starts with a forced taxable distribution, and only the balance above the RMD is eligible to convert. Both the RMD and the conversion add to your income, which is why many planners target the years between retirement and the start of RMDs at 73 as the best window for conversions.
One timing restriction applies to SIMPLE IRAs. During the first two years after you begin participating in your employer’s SIMPLE IRA, you cannot roll or convert those funds into anything other than another SIMPLE IRA; doing so triggers a taxable distribution and a 25% penalty rather than the usual 10%.10Internal Revenue Service. Retirement Plans FAQs Regarding SIMPLE IRA Plans After the two years, SIMPLE IRA funds convert under the normal rules.
The Two Five-Year Clocks
Two separate five-year periods control when you can pull money from a Roth without taxes or penalties. Confusing them is one of the most common post-conversion mistakes.
The Account Clock
Your Roth IRA must have been open for at least five tax years before you can withdraw earnings tax-free. The clock starts January 1 of the year you made your first contribution or conversion to any Roth IRA. A first contribution in December 2025 starts the clock on January 1, 2025, and the period ends January 1, 2030.
Withdraw earnings before that mark and you owe ordinary income tax on them. Under 59½, a 10% penalty stacks on top. Once both the five-year requirement is met and you have reached 59½, earnings come out completely tax-free.11Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs
The Per-Conversion Clock
Each conversion carries its own five-year waiting period, starting January 1 of the conversion year. This clock governs the converted principal. Withdraw converted amounts before the five years are up while under 59½, and the 10% early withdrawal penalty applies to the taxable portion of that conversion. Once you reach 59½, the penalty no longer applies regardless of whether five years have passed.
Roth withdrawal ordering rules decide which dollars come out first: regular contributions, then converted amounts on a first-in, first-out basis, then earnings.11Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs Contributions always come out tax- and penalty-free, so most people who have also been making regular Roth contributions can tap those dollars anytime without touching conversion-clock issues.
Executing a Conversion
The cleanest method is a direct trustee-to-trustee transfer, where your custodian moves the money straight from the Traditional IRA into the Roth. This sidesteps the 60-day rollover deadline and the 20% mandatory withholding that apply to indirect distributions you redeposit yourself. Direct transfers work across institutions too.
Your custodian will issue Form 1099-R for the conversion year, reporting the amount distributed from the Traditional IRA.12Internal Revenue Service. Instructions for Forms 1099-R and 5498 You report the taxable amount on Form 1040 using Form 8606.3Internal Revenue Service. About Form 8606, Nondeductible IRAs
A conversion must be completed by December 31 to count for that tax year. There is no April extension, unlike contributions. Year-end conversions should respect your custodian’s cutoff, which can fall mid-afternoon on the last business day. The move is also permanent. The Tax Cuts and Jobs Act eliminated recharacterization for conversions, so every Roth conversion is now irrevocable.11Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs If the market drops 30% the month after you convert, you still owe tax on the full value as of the conversion date.
Why Several Smaller Conversions Usually Win
Nothing forces you to convert everything at once, and for most people a series of partial conversions produces a better after-tax result than one large one. The idea is to fill up your current bracket each year without spilling into the next and without tripping IRMAA or the Net Investment Income Tax.
The years between retirement and the start of RMDs at 73 are often the sweet spot. Income tends to be lower, so you can convert meaningful amounts at modest rates. Once RMDs begin, they claim part of your bracket space and leave less room. Running the numbers before each conversion, rather than converting first and hoping, is the only real protection against a bill that lands bigger than you planned for.