The tax rate on a Roth conversion is your ordinary federal income tax rate, the same schedule that applies to wages. The converted amount stacks on top of everything else you earn that year, so a large conversion often gets taxed across two or three brackets rather than one. For 2026, federal rates run from 10% to 37%, and most states pile their own income tax on top. That means the real Roth conversion tax rate is personal: it depends on your other income, your filing status, your state, and a handful of secondary costs that a straight bracket lookup will miss.
Ordinary Income, Stacked on Top of Everything Else
The IRS treats the taxable portion of a conversion as ordinary income. It does not get the lower long-term capital gains rates, and it is added to your adjusted gross income for the calendar year the conversion happens.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
There is no income limit on who can convert. Anyone can move funds from a traditional IRA, SEP IRA, SIMPLE IRA, or employer plan into a Roth, regardless of earnings. Once the money is inside the Roth, future growth is tax-free, qualified withdrawals owe nothing, and the original owner has no required minimum distributions during their lifetime.2Internal Revenue Service. Retirement Plans FAQs Regarding IRAs
How the 2026 Brackets Actually Apply to a Conversion
Federal income tax is progressive. Each slice of taxable income pays its own bracket’s rate, and conversion dollars don’t get their own bracket. They fill whatever space is left in your current bracket and then spill into higher ones.
For 2026, the federal brackets for single filers are:3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10% up to $12,400
- 12% from $12,401 to $50,400
- 22% from $50,401 to $105,700
- 24% from $105,701 to $201,775
- 32% from $201,776 to $256,225
- 35% from $256,226 to $640,600
- 37% over $640,600
For married couples filing jointly, each threshold roughly doubles: the 22% bracket starts at $100,800, the 24% bracket at $211,400, and the 32% bracket at $403,550.3Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Consider a single filer with $80,000 in taxable income from a job, sitting in the 22% bracket. Converting $40,000 from a traditional IRA fills the rest of the 22% bracket first: $25,700 up to the $105,700 ceiling. The remaining $14,300 spills into the 24% bracket. The blended federal rate on that conversion is roughly 22.9%, not 22% and not 24%. Sizing the conversion to stop at a bracket line, instead of converting a blind lump sum, is often worth thousands.
The Pro-Rata Rule Changes How Much Is Actually Taxable
If you have ever made nondeductible (after-tax) contributions to a traditional IRA, you cannot pick out those specific dollars to convert tax-free. The IRS treats all your traditional, SEP, and SIMPLE IRA balances as a single pool when figuring how much of a conversion is taxable.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts
Divide your total after-tax basis by the combined value of every traditional IRA you own. That ratio is the tax-free share of any conversion. With $10,000 in after-tax contributions and $90,000 in pre-tax money across all your IRAs, 10% of every converted dollar is tax-free and 90% is taxable. Convert $20,000, and $18,000 counts as ordinary income on top of your other earnings.
You track the basis on IRS Form 8606, filed year to year.4Internal Revenue Service. Instructions for Form 8606 Forgetting the form or overlooking IRA balances at another custodian is a common filing error that leads to overpaying or underpaying.
Employer plans like 401(k), 403(b), and 457(b) accounts are not IRAs, so their balances stay out of the pro-rata pool. Rolling a large pre-tax traditional IRA into your current 401(k) is one way to strip pre-tax dollars out of the calculation and leave mostly after-tax basis behind, which makes a subsequent conversion nearly tax-free.
State Income Tax Adds a Second Layer
Most states tax conversion income the same year, as ordinary income, whether the state uses a flat rate or graduated brackets. A handful of states impose no income tax at all. Others exempt retirement income above a certain age or up to a dollar cap, which may shield some of a conversion depending on the rules. The state bite can range from zero to over 10% of the converted amount, so the total marginal cost of a conversion is often noticeably higher than the federal bracket alone suggests.
Hidden Costs That Raise Your Real Rate
Medicare IRMAA Surcharges
A large conversion can raise your Medicare premiums, with a two-year delay. The Income-Related Monthly Adjustment Amount uses your modified adjusted gross income from two years prior, so a 2026 conversion shows up in 2028 premiums.5Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
For 2026, single filers with modified adjusted gross income at or below $109,000 (or $218,000 joint) pay the standard Part B premium of $202.90 per month and no Part D surcharge. Above those thresholds, IRMAA kicks in:5Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
- $109,001–$137,000 single / $218,001–$274,000 joint: Part B $284.10/month, plus $14.50/month Part D
- $137,001–$171,000 single / $274,001–$342,000 joint: Part B $405.80/month, plus $37.50/month Part D
- $171,001–$205,000 single / $342,001–$410,000 joint: Part B $527.50/month, plus $60.40/month Part D
- $205,001–$499,999 single / $410,001–$749,999 joint: Part B $649.20/month, plus $83.30/month Part D
- $500,000+ single / $750,000+ joint: Part B $689.90/month, plus $91.00/month Part D
At the top tier, IRMAA adds nearly $9,400 per person per year in combined Part B and Part D surcharges. Crossing just the first threshold costs an extra $1,148 per person annually. These amounts are per enrollee, so a married couple on Medicare can pay them twice. If you’re on Medicare or will be within two years, check where the converted amount lands against these brackets before you convert.
Net Investment Income Tax
The 3.8% Net Investment Income Tax applies to the lesser of your net investment income or the amount your modified adjusted gross income exceeds $200,000 (single) or $250,000 (joint).6Office of the Law Revision Counsel. 26 US Code 1411 – Imposition of Tax The conversion itself is not investment income and is not directly subject to the surtax. But it raises your modified adjusted gross income, which can push existing dividends, capital gains, or rental income above the threshold and trigger the 3.8% on that income.7Internal Revenue Service. Questions and Answers on the Net Investment Income Tax The thresholds are not indexed to inflation, so more taxpayers cross them each year.
Lost ACA Premium Tax Credits
If you buy health insurance through the Affordable Care Act marketplace, conversion income is expensive in a second way. Premium tax credits are calculated from modified adjusted gross income, and a conversion raises that figure dollar for dollar. A conversion that pushes your income past certain thresholds can shrink or wipe out your subsidy, adding thousands to your annual insurance cost on top of the tax bill. Model the effect on your premiums before committing.
How You Pay the Bill Affects the Rate Too
The most expensive mistake is paying the tax out of the IRA itself. If you have your custodian withhold taxes from the converted amount, the withheld portion is treated as a distribution. Those dollars never make it into the Roth, so they lose future tax-free growth, and if you’re under 59½ the withheld amount may also trigger the 10% early withdrawal penalty. Convert $100,000 and withhold $25,000, and only $75,000 actually lands in the Roth. Pay the tax from a checking or brokerage account whenever you can.
A large conversion can also create an underpayment penalty if you don’t cover enough tax during the year. You avoid the penalty by meeting any one of these safe harbors:8Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax
- Owe less than $1,000 after withholding and credits.
- Pay at least 90% of your current-year tax through withholding and estimated payments.
- Pay at least 100% of the prior year’s tax, rising to 110% if your prior-year adjusted gross income exceeded $150,000 ($75,000 if married filing separately).
The prior-year safe harbor is usually the simplest path for a one-time large conversion. If your 2025 tax was $30,000, keeping $33,000 flowing in through withholding and estimated payments in 2026 avoids the penalty even if you owe another $50,000 with the return in April 2027.
Quarterly estimated payments for 2026 are due April 15, June 15, September 15, and January 15, 2027.9Internal Revenue Service. Estimated Tax Late-year converters sometimes prefer to increase W-2 withholding at work instead of writing an estimated payment check: withholding is treated as paid evenly across all four quarters no matter when it was actually deducted.
The Rate Is Locked In Once You Convert
Before 2018, a conversion could be reversed through recharacterization if the market dropped or your plans changed. That option is gone. Since January 1, 2018, conversions are permanent. Whatever bracket the conversion fills, whatever IRMAA tier it triggers, whatever subsidy it wipes out — those are locked for the year.
The conversion must also settle by December 31 to count for that tax year. This is different from a traditional IRA contribution, which you can make up to the April filing deadline. Waiting until late December and hitting a custodian’s processing delay can push the conversion into the next year and change all the math. Start the paperwork early.
One boundary worth naming: each conversion carries its own five-year clock. Withdrawing converted principal before that five years is up while under age 59½ triggers a 10% penalty on the taxable portion, even though income tax was already paid at conversion.10Office of the Law Revision Counsel. 26 USC 408A – Roth IRAs The clock starts January 1 of the conversion year, and it stops mattering once you reach 59½. If you plan to touch the money within five years and you’re under 59½, factor that penalty into your effective rate calculation.