How to Perform Partial Roth Conversions in 2026

Table of Contents

• What You Need Before Starting a Partial Roth Conversion
• Step 1: Estimate Your Current Taxable Income and Marginal Bracket
• Step 2: Calculate Your Partial Roth Conversion Amount
  • Using Tax Bracket Buckets to Set Your Target
• Step 3: Understand the Roth IRA Conversion Tax Implications
• Step 4: Know How the Pro-Rata Rule for IRA Conversion Works
• Step 5: Execute the Transfer: In-Kind vs. Cash
• Common Mistakes to Avoid With Partial Roth Conversions
• Frequently Asked Questions

Last Updated: September 8, 2026

What You Need Before Starting a Partial Roth Conversion

A partial Roth conversion moves a portion of your tax-deferred retirement assets, such as funds in a traditional IRA or 401(k), into a Roth IRA, where the money can grow tax-free. Before you begin, you need a clear picture of your current finances and a specific goal for converting money now rather than later.

The most common mistake is starting without a plan. Have your most recent tax return, a summary of all retirement account balances, and a firm understanding of your expected income for the conversion year. The strategy works best when you control the amount you convert, which is why performing it in stages over several years is effective.

Step 1: Estimate Your Current Taxable Income and Marginal Bracket

Your marginal federal tax bracket is the starting point, but a complete estimate must also include your state income tax bracket. While the federal government taxes a conversion as ordinary income, states vary: some fully tax it, others partially exempt it, and a few (like Texas, Florida, Nevada, and Washington) have no state income tax. Know your state's specific rule before calculating a single dollar.

Step 1A: Project your federal taxable income.

Start with your most recent tax return. Add up all expected ordinary income for the conversion year: wages, self-employment income, pensions, taxable interest, ordinary dividends, and any taxable portion of Social Security benefits (use IRS Publication 915 for a preliminary estimate). Do not include Roth IRA distributions. Subtract your expected standard deduction (for 2026, $15,000 for single filers and $30,000 for married filing jointly) or itemized deductions. The result is your projected federal taxable income.

Step 1B: Identify your federal marginal bracket.

Compare your projected taxable income against the 2026 federal income tax brackets (these are the rates that will apply to a conversion made this year):

Your marginal bracket is the rate applied to the last dollar of your current income, and the rate that will apply to every dollar you convert. For example, married filing jointly with $90,000 of taxable income puts you in the 22% bracket with $111,050 of headroom before the 24% bracket.

Step 1C: Add your state marginal rate.

Now layer in your state. If your state taxes Roth conversions as ordinary income, your true marginal rate is your federal rate plus your state rate. For instance, a California resident in the 22% federal and 9.3% state brackets faces a combined 31.3% rate, far less attractive than a Florida resident paying only the 22% federal rate. Conversely, states like Pennsylvania do not tax IRA distributions at all, so your state rate may be zero. Check your state's guidance on IRA distributions before finalizing your conversion amount.

Step 1D: Re-estimate after any late-year income changes.

Your bracket is only as accurate as your income projection. A year-end bonus, capital gain, or required minimum distribution can push you into a higher bracket. Re-run your estimate in November or December to confirm you still have room in your target bracket, and reduce or delay the conversion if income came in higher than expected.

Step 2: Calculate Your Partial Roth Conversion Amount

Calculate your conversion amount with a simple formula: subtract your projected taxable income from the upper limit of your desired marginal tax bracket. The difference is the maximum you can convert without spilling into the next bracket. For example, with $80,000 of taxable income and a $100,000 bracket limit, you can convert up to $20,000 at your current rate.

Using Tax Bracket Buckets to Set Your Target

Think of federal tax brackets as buckets of income, each taxed at a different rate. Your conversion should fill your current bucket without overflowing into the next, ensuring you never pay more than planned to move money into a tax-free account.

A practical rule is to convert only as much as you can pay the taxes on with cash outside of your retirement accounts. Using retirement funds to pay the conversion tax defeats the purpose, because it reduces the amount of money that ends up growing tax-free in the Roth IRA.

Step 3: Understand the Roth IRA Conversion Tax Implications

A Roth IRA conversion is a taxable event: the converted amount is added to your ordinary income and taxed at your current marginal rate. You pay income tax now, and in exchange, all future growth and qualified withdrawals are completely tax-free.

The trade-off is paying a relatively low rate now versus an uncertain, potentially higher rate later. This matters more as you approach age 73, when required minimum distributions can push you into higher brackets and increase Medicare premiums. Converting in stages gives you tax diversification, letting you control your taxable income each year.

Step 4: Know How the Pro-Rata Rule for IRA Conversion Works

The pro-rata rule for IRA conversion determines how much of your conversion is taxable when you hold both pre-tax and after-tax funds in traditional IRAs. If you have made nondeductible contributions, you cannot convert only the after-tax portion. The IRS requires you to aggregate all traditional IRAs, calculate the after-tax percentage of your total balance, and apply that same percentage to your conversion.

For example, if you have $90,000 in pre-tax IRA funds and $10,000 in after-tax contributions, only 10% of any conversion you make will be tax-free. This rule catches many people off guard, especially those who have rolled over a 401(k) into an IRA and then made nondeductible contributions. The official guidance from the IRS on IRA conversion rules explains how to calculate the taxable portion of a conversion using Form 8606.

Step 5: Execute the Transfer: In-Kind vs. Cash

When moving the money, you have two execution options. An in-kind transfer moves your actual investments directly from your traditional IRA to your Roth IRA without selling. A cash transfer requires selling the investments, moving the cash, and repurchasing inside the Roth IRA.

For most investors, an in-kind transfer is better because it keeps your money invested, avoiding time out of the market. A cash transfer's sale and repurchase can take days, during which the market might move against you. Both options are processed by your custodian, and you will receive a Form 1099-R. This is also where you decide on tax withholding, either from the converted amount or via estimated tax payments.

Common Mistakes to Avoid With Partial Roth Conversions

The most frequent error is converting too much in a single year without considering your full retirement income picture. A large conversion can make a portion of your Social Security benefits taxable, since the formula depends on your combined income, which includes tax-exempt interest and half of your Social Security payments.

Mistake #1: Ignoring the Social Security tax hump.

This is the most underappreciated trap in partial Roth conversions. Your taxable Social Security benefits are determined by your "combined income", adjusted gross income plus tax-exempt interest plus 50% of benefits. The formula creates a range where every additional dollar of conversion income can make up to 85 cents of benefits taxable, creating a marginal rate far higher than your nominal bracket.

For 2026, married filing jointly benefits are not taxable until combined income exceeds $32,000; between $32,000 and $44,000, up to 50% are taxable; above $44,000, up to 85% (ssa.gov). For single filers, the thresholds are $25,000 and $34,000. The "hump" occurs in these inclusion ranges: a $1,000 conversion pushing you deeper into the 85% zone can make an additional $850 of benefits taxable. At a 22% federal bracket, that adds roughly $187 of tax on top of the $220 you owe, a true marginal rate of about 40.7%.

How to avoid it: Calculate your combined income with and without the proposed conversion. If you are in the 50% or 85% inclusion range, reduce the conversion amount to stay below the threshold, or spread it across multiple years. Many retirees find converting before claiming Social Security, when combined income is lower, is far more tax-efficient.

Mistake #2: Ignoring the five-year rule.

A Roth IRA must be open for at least five years before qualified distributions of earnings are tax-free, and each conversion has its own five-year clock for avoiding the 10% early distribution penalty. If you are under age 59½, converting and then withdrawing within five years can trigger that penalty, a common mistake among younger retirees.

Mistake #3: Converting in a year when you will owe the Net Investment Income Tax (NIIT).

If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), you may owe the 3.8% NIIT on investment income (irs.gov). A conversion itself is not subject to NIIT, but the added income can push you over the threshold, subjecting dividends, capital gains, and interest to the tax, an effective surcharge most calculators miss.

Mistake #4: Forgetting the state tax deduction timing.

If you live in a state that allows a deduction for IRA contributions but taxes distributions (such as New Jersey or Massachusetts), a conversion may recapture previously deducted amounts at your current state rate. Run the state-level calculation before converting, not after.

Performing partial Roth conversions rewards patience and precision. Each conversion should be a deliberate step toward reducing future required minimum distributions and building a tax-free nest egg. Done correctly over several years, this strategy can lower your lifetime tax burden and create tax-free income for your heirs.

For individuals nearing retirement, the interaction between Roth conversions, Social Security taxation, and Medicare premiums is complex enough that professional guidance pays for itself. Tax-Free Me, led by 25-year financial advisor R. Neal Angel, specializes in retirement tax planning and helps clients implement these exact strategies to reduce taxes in retirement and pass more wealth to the next generation.

The challenge with partial Roth conversions is that the rules are precise, but your financial picture is constantly changing. Getting the timing and the amount right requires analyzing your full tax situation, not just guessing at a number. That is where working with a specialist matters. Get started with Tax-Free Me and let our team model your conversion strategy across multiple years, so you can reduce your tax burden with confidence and secure the tax-free legacy you have planned for.