To convert an IRA to a Roth IRA, you tell the custodian holding your traditional, SEP, or SIMPLE IRA to move some or all of the balance into a Roth IRA, then pay ordinary income tax on the pre-tax portion in the year of the transfer. There is no income limit on who can convert, and you can convert any amount you choose. The mechanics are straightforward; the tax math and the timing are where the work is.
Who Can Convert and When
Anyone with a traditional IRA can convert part or all of the balance to a Roth IRA at any time. SEP IRA holders have the same option. The one waiting period involves SIMPLE IRAs: you must wait at least two years from the date you first participated in the SIMPLE plan before converting to a Roth. Convert a SIMPLE IRA before that window closes and you’ll owe a 25% early distribution penalty on top of regular income taxes, rather than the usual 10%.1Internal Revenue Service. SIMPLE IRA Withdrawal and Transfer Rules
The Three Ways to Move the Money
How you move the funds matters more than most people expect, because one method carries a hard deadline and the other two do not.
- Same-institution transfer. Your traditional IRA and Roth IRA sit at the same firm, and the custodian moves the assets between accounts internally. Least paperwork, no deadline risk.
- Trustee-to-trustee transfer. Your traditional IRA is at one firm and your Roth IRA at another. The sending custodian wires the funds directly to the receiving custodian, and you never touch the money.
- 60-day rollover. The custodian sends you a check, and you have exactly 60 calendar days to deposit the full amount into a Roth IRA. Miss the deadline by a day and the IRS treats the balance as a taxable distribution. If you’re under 59½, a missed deadline also triggers a 10% early withdrawal penalty on top of income tax.2Internal Revenue Service. Topic No. 413, Rollovers From Retirement Plans3Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
The 60-day rollover is where most problems happen. Your custodian may withhold a portion for federal income tax when cutting the check, and you’re still responsible for depositing the full pre-withholding amount into the Roth within 60 days. Any shortfall gets treated as a distribution rather than a conversion. Use a direct transfer whenever possible.
Most custodians have a Roth conversion form (sometimes labeled “distribution request” or “account transfer”) that you complete to authorize the transaction. Many brokerages let you do it entirely online, typically under a section labeled “Move Money” or “Account Transfers.” You select the source account, the destination Roth IRA, and confirm. Assets can transfer as cash after being sold, or in kind, meaning stocks and mutual funds move directly without being liquidated. Processing typically takes three to five business days.
The form also asks whether you want federal and state tax withheld from the conversion itself. Electing withholding reduces the amount that lands in your Roth IRA, which means fewer dollars growing tax-free. Many people pay the tax bill from other funds and convert the full balance instead, but the trade-off is worth understanding before you check a box.
How Much of the Conversion Is Taxable
If every contribution you ever made to a traditional IRA was deductible, the math is simple: the entire converted amount is ordinary income in the year you convert. There’s no basis to subtract.
If you’ve made after-tax (nondeductible) contributions at any point, you don’t owe tax on those dollars again. The catch is that you can’t cherry-pick which dollars move. The IRS uses the pro-rata rule, treating all your traditional, SEP, and SIMPLE IRA balances as one combined pool.4Internal Revenue Service. About Form 8606, Nondeductible IRAs
The calculation: divide your total nondeductible contributions (your “basis”) by the combined year-end value of all your traditional, SEP, and SIMPLE IRAs. That fraction is the tax-free portion of any conversion. If you have $20,000 in basis and $200,000 across all IRAs, 10% of whatever you convert is tax-free and 90% is taxable income. It doesn’t matter that you’re pulling from one specific account; the IRS looks at the aggregate.
Your basis lives on IRS Form 8606, which you should have filed in any year you made nondeductible contributions. If you haven’t filed this form in past years, reconstruct your records from old contribution statements and tax returns before converting. Getting this wrong means either overpaying (taxing dollars you already paid tax on) or underpaying and facing penalties later.5Internal Revenue Service. Instructions for Form 8606 (2025)
Paying the Tax Without Triggering a Penalty
A conversion can create a large tax liability in a single year, and the IRS expects you to pay as you go. If your wage withholding won’t cover the additional tax, you’ll likely need to make estimated tax payments to avoid an underpayment penalty.
Estimated payments for the 2026 tax year are due in four installments: April 15, June 15, and September 15 of 2026, plus January 15, 2027.6Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals You can skip the January payment if you file your 2026 return and pay the full balance by February 1, 2027.
To avoid the underpayment penalty, your total payments (withholding plus estimated payments) must meet one of two safe harbors: at least 90% of your 2026 tax liability, or at least 100% of what you owed for 2025. If your 2025 adjusted gross income exceeded $150,000 ($75,000 if married filing separately), the prior-year safe harbor rises to 110%.6Internal Revenue Service. 2026 Form 1040-ES, Estimated Tax for Individuals
Timing matters. A conversion done in January gives you all year to spread out estimated payments. A December conversion leaves you scrambling. If you convert late in the year, one option is to increase withholding on your remaining paychecks, since the IRS treats withheld taxes as paid evenly throughout the year regardless of when they actually came out.
Reporting the Conversion at Tax Time
After the calendar year ends, the custodian that held your traditional IRA issues Form 1099-R documenting the distribution. Box 7 shows a distribution code: Code 2 if you were under 59½ at the time of the conversion, Code 7 if you were 59½ or older.7Internal Revenue Service. 2025 Instructions for Forms 1099-R and 5498
You report the conversion on Form 8606. Part I tracks your basis in nondeductible contributions. Part II calculates the taxable portion: you enter the total converted amount, subtract your basis, and the result is your taxable income from the conversion.8Internal Revenue Service. Form 8606, Nondeductible IRAs Even if you had no nondeductible contributions and the entire conversion is taxable, you still file Form 8606 to report the conversion.4Internal Revenue Service. About Form 8606, Nondeductible IRAs
The numbers flow onto Form 1040. The total distribution goes on Line 4a, and the taxable portion goes on Line 4b.9Internal Revenue Service. Form 1040 A Line 4b that’s lower than Line 4a signals to the IRS that you had basis, and your Form 8606 is the documentation backing that up.
Things to Check Before You Pull the Trigger
The Conversion Is Permanent
Before 2018, you could undo a Roth conversion by “recharacterizing” it back to a traditional IRA if the account value dropped or the tax hit was larger than expected. The Tax Cuts and Jobs Act eliminated that option for conversions made in 2018 and later. Every Roth conversion is now irrevocable.10Office of the Law Revision Counsel. 26 U.S. Code 408A – Roth IRAs Run the numbers before you convert, not after. If you’re unsure about the tax impact, convert a partial amount and add more later.
Two Five-Year Clocks
Each Roth conversion starts its own five-year clock, beginning on January 1 of the year you convert. This matters if you’re under 59½ and plan to withdraw the converted principal before five years have passed. In that case, the portion of the conversion that was included in your income is subject to a 10% early withdrawal penalty, even though you already paid income tax on those dollars.11Internal Revenue Service. 26 CFR 1.408A-6, Taxability of Distributions From Roth IRAs Once you reach 59½, the five-year conversion rule no longer applies.
A separate five-year rule governs earnings. To withdraw earnings completely tax-free, you must be at least 59½ and at least five years must have passed since your first Roth IRA contribution or conversion (whichever came first). The two clocks are independent; don’t confuse them.
Medicare Premiums Two Years Out
Conversion income shows up on your tax return as ordinary income, and Medicare uses your tax return from two years prior to set your premiums. A large conversion in 2026 could push your 2028 Medicare Part B and Part D premiums into a higher bracket through the Income-Related Monthly Adjustment Amount (IRMAA).
For 2026, IRMAA surcharges for Part B begin when individual modified adjusted gross income exceeds $109,000 ($218,000 for joint filers). At the first surcharge tier, you’d pay an extra $81.20 per month for Part B and $14.50 for Part D. Surcharges rise through several tiers, reaching an additional $487.00 per month for Part B and $91.00 for Part D at the top bracket (individual income of $500,000 or more).12Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
A conversion done in your early 60s, before Medicare enrollment at 65, has no IRMAA impact. Converting during your Medicare years takes careful sizing to avoid jumping into a higher premium bracket, or at least accounting for the added cost when deciding how much to convert.
State Income Tax
The federal tax gets the most attention, but state income taxes can add significantly to the bill. State income tax rates range from 0% in the nine states with no personal income tax up to 13.3% at the top bracket in the highest-tax state. Most states that impose an income tax treat Roth conversions the same way the federal government does, as ordinary income in the year of conversion. If you’re planning a conversion and expect to move to a lower-tax or no-tax state soon, the timing of your conversion relative to your move can save a substantial amount.