The Tax Bracket Strategy for Roth Conversions

Key Takeaways

• Convert up to the top of your current tax bracket — never into the next one — unless the math says otherwise.
• Marginal rate, not effective rate, is what a conversion costs you.
• Multi-year bracket-filling beats one big conversion in almost every case.

Fill the Bracket, Not the Year

The single most important technique in conversion planning is bracket-filling. Your income for the year occupies the brackets from the bottom up; a conversion stacks on top. If you have $30,000 of room left in the 24% bracket before income spills into 32%, converting exactly $30,000 costs 24% — but converting $35,000 costs 24% on $30,000 and 32% on $5,000. The optimal move is to convert up to the ceiling of your target bracket every year, year after year, until the pre-tax balance is where you want it. The 2026 brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) and the standard deduction mean a retired couple can often convert $100,000+ per year while staying in the 12% or 22% brackets.

Marginal vs Effective — Know the Difference

A common error is dividing the tax bill by income to get an "effective rate" and concluding a conversion is cheap. What matters is the marginal rate on the converted dollars — the rate on the last dollar, which is what the conversion actually costs. A retiree with $50,000 of income may have an effective rate of 8%, but the next $30,000 of conversion is taxed at 12%, and the $30,000 after that at 22%. Always compute the marginal cost of the specific conversion amount, not the blended average. The home-page calculator asks for your marginal rate for exactly this reason.

The Multi-Year Plan

1. Estimate your income and deductions for the year; compute the room to the top of your target bracket.
2. Convert that amount in December (or January for the next year).
3. Repeat annually, tracking each conversion's five-year clock.
4. Stop when your pre-tax balance is small enough that future RMDs stay manageable — the goal is control, not zero.

What to Watch For

• IRMAA: a conversion that crosses Medicare surcharge thresholds (roughly $106,000 single / $212,000 married in 2026) costs extra — check before filling the bracket.
• Credits: the Earned Income Credit, Child Tax Credit, and education credits phase out with income — bracket-filling can cost more than the bracket math suggests.
• State brackets: fill your state bracket too — the same ceiling logic applies.
• Rate changes: if you expect higher rates later, fill brackets aggressively now; if lower, wait.

Worked Example: The Retired Couple

Dan and Rosa, both 64, retired, have $900,000 in Traditional IRAs, $40,000 of annual Social Security starting next year, and no other income. This year their taxable income is minimal — roughly $30,000 after the standard deduction for a couple over 65 — leaving enormous room in the 12% bracket (which extends to about $94,000 of taxable income for couples in 2026). Their plan: convert $60,000 this year, all inside the 12% bracket, and repeat for five years — converting $300,000 at 12% while paying the tax from cash. The alternative — doing nothing — means RMDs at 73 on the full $900,000+, likely taxed at 22-24% while also triggering higher Medicare premiums. By converting through the 12% window they save roughly 10 percentage points on $300,000: about $30,000, plus permanently lower future RMDs and IRMAA. The bracket strategy is not theory — it is a five-year calendar with a tax bracket as its engine.

Filling Brackets, Not Spilling Over

The bracket strategy is precise: convert just enough each year to fill your current marginal bracket to the top, without spilling into the next one. For 2026, a married couple filing jointly fills the 12% bracket up to $96,950 of taxable income, and the 22% bracket up to $206,700. If your taxable income is $60,000, you have roughly $37,000 of 12% headroom — converting $35,000 keeps the entire conversion at 12%. Compare that to converting $60,000, which pushes $23,000 into the 22% bracket — an extra $2,300 in tax for no benefit. The strategy compounds over years: filling the 12% bracket every year from 55 to 72 moves $600,000+ into Roth at a bargain rate. Also factor in the standard deduction ($30,000 for married couples in 2026) — it creates additional conversion headroom at the 0% rate for low-income years, effectively free conversions up to the deduction amount.