Can You Convert a Rollover IRA to a Roth IRA?

You can convert a rollover IRA to a Roth IRA at any age and at any income level. The catch is tax: because a rollover IRA usually holds pre-tax money from a former employer’s plan, the amount you move is added to your ordinary income for the year and taxed at your regular rate, which runs from 10% to 37% for 2026. In exchange, the money grows tax-free from that point on and comes out tax-free in retirement.

Who Can Convert

The income cap on Roth conversions disappeared when the Tax Increase Prevention and Reconciliation Act of 2005 took full effect in 2010. Today, anyone with a valid Social Security Number or ITIN and an open Roth IRA can convert, regardless of filing status or how much they earn.¹

One boundary matters up front. If you inherited a traditional IRA from someone who was not your spouse, you cannot convert it. Non-spouse beneficiaries have to leave the account titled in the deceased owner’s name for their benefit and cannot roll it into any other account.² A surviving spouse can roll an inherited IRA into their own IRA first, and then convert.

How to Move the Money

There are two mechanics. Which one you pick changes how much can go wrong.

Direct Trustee-to-Trustee Transfer

The rollover IRA custodian sends the funds straight to the Roth IRA custodian. You never handle the money. Most firms have a Roth conversion form where you specify a full or partial conversion and choose whether to withhold taxes. It typically settles in three to ten business days.

60-Day Indirect Rollover

The custodian sends you a check and you have 60 days to deposit the full amount into a Roth IRA.³ Miss the window and the IRS treats the whole amount as a taxable distribution, plus a 10% early withdrawal penalty if you are under 59½.⁴

If your custodian withholds taxes from the check, you still have to deposit the full pre-withholding amount to complete the conversion. Convert $50,000 with $10,000 withheld and you have to come up with that $10,000 from your own pocket to make the Roth whole. The withheld amount comes back as a credit on your return, but if you don’t replace it, that $10,000 is treated as a taxable distribution.

If you miss the 60-day deadline because of something outside your control, such as a serious illness, a postal error, or a mistake by the financial institution, you may be able to self-certify for a waiver using an IRS model letter, submitted to the institution receiving the late funds.⁵ Self-certification is not a guarantee; if the IRS later disagrees, taxes and penalties follow.

Deadline and Frequency

A conversion has to be completed by December 31 of the year you want it credited to. There is no April extension. You can convert more than once in a year; the one-rollover-per-year limit on indirect IRA-to-IRA rollovers does not apply to Roth conversions.⁶

The Tax Bill

The converted amount is added to your ordinary income for the year of the distribution.⁷ A large conversion can push you into a higher federal bracket. For 2026, a single filer’s rates step from 10% up to 37% at $640,600 of taxable income, with married-filing-jointly thresholds roughly double.⁸ Brackets are progressive, so only the income falling inside each band is taxed at that band’s rate. A conversion doesn’t raise the rate on the rest of your income.

The Pro-Rata Rule

If your traditional, rollover, and SEP IRAs together hold both pre-tax and after-tax dollars, you can’t cherry-pick the after-tax portion for the conversion. The IRS treats all of your traditional IRA balances as a single pool and taxes the conversion proportionally.³ If $90,000 of the combined balance is pre-tax and $10,000 is after-tax, 90% of anything you convert is taxable, even if the after-tax money sits in a separate account. The calculation runs on Form 8606.⁹

Paying the Tax Without a Penalty

A big conversion creates a one-time tax bill that ordinary paycheck withholding may not cover. The IRS charges an underpayment penalty when you expect to owe at least $1,000 after withholding and credits and your payments come in below both 90% of your current year’s tax and 100% of last year’s tax. If your prior-year AGI was over $150,000 ($75,000 if married filing separately), the safe harbor is 110% of last year’s tax.¹⁰

You can cover the added liability with quarterly estimated payments, extra payroll withholding, or by having the custodian withhold federal tax at the moment of conversion. Withholding out of the conversion itself shrinks what actually lands in the Roth, so paying from outside funds preserves more of the tax-free growth.

The Five-Year Rule on Withdrawals

Every conversion starts its own five-year clock, running from January 1 of the year of the conversion. Pull the converted funds out before that five years is up and you are under 59½, and you owe a 10% penalty on the portion that was taxable at conversion.⁷ That penalty hits the converted principal, not just earnings.

Once you are past 59½, the 10% penalty is off the table whether or not the five years has passed. A separate five-year rule governs earnings: for earnings to come out entirely tax-free, at least five tax years must have passed since your first Roth IRA contribution or conversion of any kind.⁷ Miss that one at 59½ or older and earnings withdrawn are taxable as ordinary income, though still penalty-free.

Required Minimum Distributions Come First

If you have hit age 73 and owe a required minimum distribution from your rollover IRA, take the full RMD before converting anything else. The IRS treats the first dollars leaving a traditional IRA each year as satisfying that year’s RMD. Convert those first dollars instead, and the amount becomes an excess Roth contribution carrying a 6% excise tax every year it sits in the account.¹¹¹

On the other side of the ledger, Roth IRAs are not subject to RMDs during the owner’s lifetime.¹¹ For people who don’t need the money for expenses, converting can keep the balance growing tax-free for the rest of their life.

Watch for Medicare and Investment Surtaxes

A conversion raises income for the year, and income drives a few costs beyond the tax bill.

Medicare Part B and Part D premiums are set from your modified adjusted gross income two years earlier. For 2026, IRMAA surcharges start at income above $109,000 for individuals and $218,000 for married couples filing jointly.¹² A single large conversion can lift your premium tier two years down the road. Spreading conversions over several years is how people near or in Medicare keep income under those thresholds.

The 3.8% net investment income tax kicks in when modified adjusted gross income clears $200,000 (single) or $250,000 (married filing jointly).¹³ The conversion itself is not net investment income, but it raises your MAGI, and if you have dividends, capital gains, or rental income, the higher MAGI can pull that investment income into the 3.8% net.

You Can’t Undo It

Conversions used to be reversible through a process called recharacterization. The Tax Cuts and Jobs Act of 2017 ended that for any conversion completed after December 31, 2017. Once the money is in the Roth, the tax is locked in. Run the numbers before you convert, not after.

Forms and Reporting

Your rollover IRA custodian issues a Form 1099-R for the year, using the distribution code that flags the payment as a Roth conversion.¹⁴ You report the conversion on your federal return and file Form 8606 to calculate the taxable portion. Form 8606 is required for every Roth conversion from a traditional IRA, not only those involving after-tax money.¹⁵

If your rollover IRA carries any nondeductible contributions, Form 8606 tracks your basis across all your traditional IRAs so those dollars are not taxed a second time. States with an income tax generally require you to report conversion income on the state return as well, and state withholding rules vary.

1
Internal Revenue Service. Roth Conversions – Retirement Planning for Life Events
2
Internal Revenue Service. Publication 590-B – Distributions From Individual Retirement Arrangements
3
Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
4
Office of the Law Revision Counsel. 26 USC 72 – Annuities; Certain Proceeds of Endowment and Life Insurance Contracts
5
Internal Revenue Service. Retirement Plans FAQs Relating to Waivers of the 60-Day Rollover Requirement
6
Internal Revenue Service. Rollovers of Retirement Plan and IRA Distributions
7
Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs
8
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
9
Internal Revenue Service. About Form 8606 – Nondeductible IRAs
10
Internal Revenue Service. Form 1040-ES – Estimated Tax for Individuals
11
Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
12
Centers for Medicare and Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
13
Internal Revenue Service. Topic No. 559 – Net Investment Income Tax
14
Internal Revenue Service. Instructions for Forms 1099-R and 5498
15
Internal Revenue Service. Instructions for Form 8606