Phase 2 · Wealth & Leverage
Roth Conversion Calculator
A conversion is voluntary income — you choose the year and the amount. See exactly what it costs in federal tax, how much room is left in your current bracket, and what the converted money is worth tax-free decades later.
How much tax will I pay on a Roth conversion?
A conversion is ordinary income, so it stacks on top of everything else you earn this year. The federal cost is your tax with the conversion minus your tax without it. In 2026, a single filer with $90,000 of other income converting $50,000 owes about $11,364 — a 22.7% effective rate on the conversion, even though its top dollars are taxed at 24%.
- Tax on the conversion = tax(other income + conversion) − tax(other income), both computed on income after the standard deduction.
- Worked example (2026, single, $90,000 other income): the $16,100 standard deduction leaves $73,900 taxable, so $31,800 of room remains before the 24% bracket begins at $105,700.
- Converting $50,000 on top of that spends the headroom and pushes $18,200 into the 24% bracket — a 24% marginal rate but a 22.7% effective rate on the conversion.
- Paying the tax from outside funds keeps all $50,000 compounding tax-free — about $137,952 after 15 years at 7%, with nothing owed on withdrawal.
- Federal only: state tax, IRMAA surcharges, NIIT and ACA subsidy phase-outs are not modeled here.
Under the hood
The math, fully exposed
The conversion is stacked on top of your other income and priced through the 2026 federal brackets. Bracket thresholds and standard deductions come from this site's single shared tax table, so every tax tool here agrees:
Taxable income = other income − standard deduction (floored at $0)
Tax on conversion = tax(taxable + conversion) − tax(taxable)
Marginal rate = the rate of the bracket your last converted dollar lands in
Effective rate = tax on conversion ÷ conversion
Bracket headroom = top of your current bracket − taxable income before converting
Roth at withdrawal = conversion × (1 + g)n — withdrawn tax-free
Traditional at withdrawal = conversion × (1 + g)n — identical gross, still fully taxable
Tax still owed later = Traditional balance × your current marginal rate
- Only the spill costs more: brackets are marginal, so the converted dollars that fit inside your current bracket are taxed at today's rate and only the amount above the threshold is taxed higher. That is why the effective rate on a conversion is almost always lower than the marginal rate.
- The gross balances are identical — the ownership isn't: $1 converted and $1 left in the Traditional account grow to exactly the same pre-tax number. The difference is that the Roth dollar is finished with the IRS and the Traditional dollar still owes ordinary income tax at whatever rate applies decades from now. Converting is a bet that today's rate is the cheaper one.
- Headroom is a use-it-or-lose-it budget: the room left in your bracket resets every January. A low-income year, or the gap between retiring and RMDs at 73, is bracket space you can fill at a rate you may never see again.
- Pay the tax from outside the account: withholding the tax from the conversion itself shrinks what lands in the Roth, permanently forfeiting the tax-free growth on that slice — and can trigger a 10% early-distribution penalty under 59½.
- Federal income tax only. State income tax, Medicare IRMAA surcharges, the 3.8% NIIT, ACA premium-subsidy phase-outs, the pro-rata rule on non-deductible IRA basis and Social Security taxability are all excluded. Each can raise the real cost. This is an educational model, not tax advice.
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Answers
Frequently asked questions
What is a Roth conversion?
A Roth conversion moves money from a pre-tax account — a Traditional IRA, SEP/SIMPLE IRA or an old 401(k) — into a Roth IRA. The converted amount is added to your ordinary income for the year and taxed at your marginal rates, but from then on it grows tax-free, comes out tax-free in retirement, and is never subject to Required Minimum Distributions. There is no income limit and no dollar cap on how much you can convert.
When does a Roth conversion make sense?
When your tax rate today is lower than the rate you expect later. The classic windows are a low-income year (a sabbatical, a business loss, early retirement before Social Security starts) and the gap years between retiring and RMDs at 73, when your taxable income dips and you have bracket space to fill cheaply. Converting during a market drawdown also helps: you pay tax on the depressed value and the recovery happens inside the Roth, tax-free.
What is the 5-year rule on conversions?
Each conversion starts its own 5-year clock. If you withdraw converted principal before that clock runs out and you are under 59½, you owe a 10% penalty on the converted amount — even though the tax was already paid. A separate 5-year rule requires your first Roth IRA to have been open five years before earnings come out tax-free. Convert money you will not need to touch for at least five years.
Should I pay the conversion tax from the IRA or from outside money?
From outside money, almost always. If you withhold the tax from the conversion itself, less money lands in the Roth, so you lose the tax-free compounding on that amount forever — and if you are under 59½, the withheld portion counts as an early distribution and can trigger its own 10% penalty. Paying from a taxable account effectively shifts extra dollars into the tax-free bucket for free.
What does this calculator leave out?
A lot, deliberately. This is a federal income-tax estimate only. It does not model state income tax, the Medicare IRMAA surcharges that extra income can trigger two years later, the 3.8% Net Investment Income Tax, ACA premium-subsidy phase-outs, the pro-rata rule on non-deductible IRA basis, credit phase-outs, or how much of your Social Security becomes taxable. Every one of those can make a conversion more expensive than the headline number. It is an educational model, not tax advice.