The True Cost of a Roth Conversion

The taxable estimate is conversion × (1 − remaining basis ÷ pre-conversion IRA pool). This shortcut matches the simplified no-other-flows/no-value-change case; it is not a substitute for Form 8606, whose denominator includes year-end balances, distributions and conversions. Basis above the pool or a conversion above the pool is rejected.

Workplace-plan rollovers and inherited accounts are outside this tool. A SIMPLE IRA generally cannot be converted during the first two years of participation. Required minimum distributions cannot be converted; this model does not handle RMD-year cash flows. A zero estimate does not establish eligibility to convert.

Each money input must be between $0 and $1 billion. This is a calculation safeguard, not a tax-law limit.

Taxable Social Security is based on other income, tax-exempt interest and half of benefits. The first thresholds are $25,000 single/head of household and $32,000 joint; the higher thresholds are $34,000 and $44,000. Up to 85% of benefits can be taxable. That is a taxable share of benefits, not an 85% tax rate.

To explain the cost, we first hold taxable benefits at their no-conversion amount and recalculate ordinary tax and the senior deduction. The additional ordinary tax after letting benefits change is the Social Security component. Capital-gain and dividend effects stay in their own line. Together, the components equal the actual modeled federal-tax difference.

Ordinary income sits below long-term gains and qualified dividends in the tax calculation. The 2026 0%-rate ceilings are $49,450 single, $98,900 joint and $66,200 head of household; the 15%-rate ceilings are $545,500, $613,700 and $579,600. A conversion can affect the 0%, 15% or 20% band or the deduction available against gains. The model also applies the worksheet's lower-of comparison with regular tax.

NIIT is 3.8% of the smaller of net investment income or modified AGI above $200,000 single/head of household or $250,000 joint. The conversion is not net investment income, but can increase exposure of existing investment income. The model includes only the positive interest, dividend and gain amounts entered; rental income, investment-expense adjustments and foreign-income adjustments are outside its scope.

A taxable 2026 conversion generally affects 2028 Part B and Part D premiums. IRMAA MAGI includes AGI plus tax-exempt interest. The actual 2028 table is not yet published: this tool holds the official 2026 table constant and labels the output a planning benchmark.

Part B and Part D enrollment counts are separate; a surcharge is assessed per covered person. The estimate assumes 12 months of that coverage. It excludes base premiums, partial-year enrollment, appeals, penalties and special coverage rules. Use the IRMAA Trap Detector for a focused premium comparison.

The nine-state conversion-income-tax boundary listed above is deliberately narrow. All other states and DC read Not modeled, even where a particular taxpayer might qualify for an exclusion. We do not apply a top rate to a federal tax base or equate an omitted estimate with $0. Local taxes, nonresident returns and state-benefit interactions are not calculated.

The future illustration follows only the proposed conversion slice. Roth value is conversion × (1 + return)^years, assuming a qualified tax-free withdrawal. The Traditional alternative is that grown value minus the assumed future rate applied to grown value less allocated basis. Basis is returned once; it does not itself compound as additional tax-free basis.

Outside cash pays all modeled conversion costs. Its opportunity cost is that cash plus hypothetical investment gains after a 15% tax on gains at sale, with no annual tax drag. The displayed conversion comparison subtracts that full opportunity cost. The later IRMAA benchmark is treated as spent today for simplicity. Constant returns, a single future withdrawal rate and a 15% sale-tax assumption are illustrations—not promises or personalized tax forecasts.

• No full tax return: ACA premium tax credits, AMT, QBI, other credits and deduction phase-outs, self-employment taxes, student-loan payments and means-tested benefits are not calculated.
• No married-filing-separately, qualifying-surviving-spouse, dependent, nonresident, foreign-income, special capital-gain, or unusual Social Security repayment/lump-sum case.
• No IRA withdrawals to pay conversion tax, withholding, estimated-tax penalties, RMD schedule or multi-year optimization. Cash paid from the IRA changes the result.
• No early-withdrawal tax estimate. Before age 59½, a distribution allocated to the taxable portion of a conversion within its separate five-tax-year period can face a 10% additional tax unless an exception applies. Qualified Roth withdrawal rules and Roth ordering rules must also be satisfied.

Use this bounded estimate to frame questions, then compare complete federal and state returns before taking action.

• IRS Revenue Procedure 2025-32, sections 4.01, 4.03 and 4.14: 2026 brackets and deductions.
• Schedule 1-A, Part V and IRS senior-deduction guidance: eligibility and phase-out. The linked form is the current 2025 edition; the calculation is applied to the enacted 2026 rule.
• IRS Publication 915, Worksheet 1: Social Security taxability.
• Form 1040 instructions, Qualified Dividends and Capital Gain Tax Worksheet: preferential-rate stacking and the regular-tax comparison. 2026 indexed thresholds come from the revenue procedure above.
• IRS NIIT overview and NIIT questions and answers: rate, thresholds and the retirement-distribution distinction.
• CMS 2026 Medicare premium tables and SSA premium explanation: surcharge amounts and look-back.
• Form 8606, lines 6–11, and its instructions: IRA aggregation, basis and conversion reporting.
• IRS Publication 590-A: conversion and rollover eligibility; Publication 590-B: distributions, qualified Roth withdrawals and conversion-related additional tax; SIMPLE IRA transfer rules: the two-year restriction.

Updated September 26, 2026. Questions or corrections: corrections@rothirahub.com.