The True Cost of a Roth Conversion

Under IRC §86, up to 85% of Social Security benefits become taxable once provisional income (AGI excluding SS + ½ of SS benefits + tax-exempt interest) exceeds $25,000 single or $32,000 MFJ. The conversion you add on top of other income raises provisional income directly, pushing more of your SS into the taxable 50% or 85% tier.

The effect: for every extra $1 of conversion in the phase-in zone, you can add $1.50 or $1.85 of taxable income — producing effective marginal rates as high as 22.2%, 40.7% or 49.95% on conversion dollars. That is the tax torpedo. We compute it by running your federal tax with and without the conversion and attributing the delta from incremental SS taxability to the SS component.

Medicare's Income-Related Monthly Adjustment Amount (IRMAA) is a Part B and Part D premium surcharge that changes at hard MAGI boundaries. IRMAA MAGI is AGI plus tax-exempt interest. A taxable 2026 conversion generally enters the return used for 2028 premiums.

The exact 2028 table is not published. This tool uses the official 2026 CMS table as a 2028 planning benchmark and never labels those amounts as official 2028 values. Part B and Part D counts are separate because each enrolled person is assessed independently and coverage can differ within a household.

The result annualizes 12 months of the selected coverage. It does not model partial-year enrollment, the separate immunosuppressive-drug-only Part B table, late-enrollment penalties, Medicare Advantage reductions, or the underlying Part D plan premium. For exact tier and coverage diagnostics, use the IRMAA Trap Detector.

The Net Investment Income Tax (IRC §1411) is 3.8% on the lesser of investment income or MAGI over $200,000 single / $250,000 MFJ. Roth conversions are not investment income for NIIT purposes — but they count toward MAGI. So a conversion can push MAGI over the threshold, exposing your interest, dividends, capital gains, and rental income to the 3.8% tax they otherwise wouldn't owe.

We compute NIIT both with and without the conversion and charge the incremental NIIT as a conversion cost.

Long-term capital gains and qualified dividends are taxed at 0% if your taxable income (including LTCG) stays below $49,450 single / $98,900 MFJ / $66,200 HoH in 2026. Ordinary income fills the stack first. A conversion pushes LTCG out of that 0% room and into the 15% or 20% brackets.

We compute the LTCG tax with and without the conversion; the difference is charged as a conversion cost. For many retirees this single line item is the dominant hidden cost.

For most state selections, we apply the listed top marginal rate to the federally taxable portion of the conversion. Nine states (AK, FL, NV, NH, SD, TN, TX, WA, WY) have no personal income tax. Pennsylvania does not tax traditional-to-Roth conversions at any age, per PA DOR REV-636 (cost-recovery method applied to later earnings distributions). Illinois also excludes retirement income. Georgia taxes a conversion at a flat 4.99% for 2026, but its retirement income exclusion — $35,000 per taxpayer at 62 to 64 and $65,000 at 65 or over — can reduce or eliminate that from age 62, so this tool overstates the Georgia cost for older residents; see the Georgia guide. Ohio taxes a conversion at a flat 2.75% for 2026 (down from 3.5% in 2024); Ohio school districts may add 0–2% depending on the district’s tax base, and Ohio city income taxes never apply to IRA income — see the Ohio guide. North Carolina’s figure reflects the TY2026 flat 3.99% (S.L. 2026-41); the rate falls by statute to 3.49% for 2027–2029 — see the North Carolina guide. Michigan’s 4.25% is correct for TY2026, but neither tool models the restored retirement subtraction: a converter who has reached 59½ can shelter up to $67,610 (single) or $135,220 (joint) of conversion income, so the figure here can overstate the state cost — while a converter under 59½ may owe city tax the tool does not show. See the Michigan guide. Bailey-vested government retirees may owe nothing on a direct conversion.

New Jersey, Virginia, Maryland, Massachusetts and Colorado are intentionally excluded. Selecting one of these states returns Not modeled, not $0. New Jersey starts with its own Worksheet C basis rather than federal Form 8606 basis, applies graduated rates, and may allow an age-62-or-disabled retirement income exclusion when total income is $150,000 or less. Virginia applies graduated rates and may reduce an eligible taxpayer’s age deduction as income rises; taxable conversion income can therefore cost more than a flat-rate shortcut suggests. See the New Jersey guide or the Virginia guide and model the state return separately. For every modeled state, the listed rate remains an approximation; actual liability depends on that state's brackets, deductions, exclusions, and local taxes. Maryland also requires county and income-interaction inputs. Read the Maryland guide; state and county tax are not included. Massachusetts also requires its own IRA cost-recovery records and taxable-income inputs for the 5% tax and 4% surtax above the 2026 $1,107,750 threshold. Massachusetts tax is not included. Colorado also requires retirement-income and income-threshold inputs. Read the Colorado guide; Colorado income tax is not included.

The converted dollars grow tax-free in the Roth and are withdrawn tax-free (once qualified), so their future value is C × (1+r)^N. The not-converted dollars stay in the traditional IRA and grow tax-deferred; when withdrawn they're taxed at your retirement marginal rate, leaving C × (1+r)^N × (1 − tret).

Against this, the conversion costs T today. We model that T as if you'd instead invested it in a taxable account earning the same return, with 15% LTCG tax at liquidation. The difference is the net benefit of converting at year N. Break-even is where this crosses zero.

The shortcut heuristic: convert when your blended effective conversion rate (total cost ÷ conversion amount) is lower than tret. If that's false, you're paying more tax today than you'd have paid later.

We compute the largest conversion that (a) doesn't cross the next IRMAA cliff, (b) doesn't trigger NIIT, (c) doesn't push LTCG out of 0%, and (d) doesn't spill into the next ordinary-income bracket. The binding constraint wins. That's the sweet spot — the largest move you can make this year without hitting a cliff.

What it is not: an answer to whether you should convert at all. That's the break-even question above. And the sweet spot often says “partial conversion” — converting in tranches across multiple years is usually better than one big move, which is exactly what the Conversion Planner tool models.

• ACA premium tax credit phase-out (pre-65 early retirees buying on an Exchange). The ACA premium-tax-credit phase-out treatment is subject to change pending OBBBA implementation and subsequent legislation; verify current-year treatment. Model separately on healthcare.gov's calculator.
• Income-based student loan repayment changes.
• Qualified Business Income deduction interactions.
• State tax quirks beyond the top marginal rate (PA & IL retirement-income exclusions flagged; CA's AMT, OR's inheritance thresholds, NY's pension exclusion are not modeled).
• Estimated-tax underpayment penalties if you don't remit the conversion tax by the quarterly deadline.
• The 5-year clock on each conversion (IRC §408A(d)(2)(B)) — withdrawals of converted principal before age 59½ within 5 years of conversion incur a 10% penalty. If you're pre-59½ and need the converted money soon, think twice.
• Multi-year optimization — this tool answers “what does converting $X this year cost me?” For a multi-year strategy use our Conversion Planner.

• Rev. Proc. 2025-32 — 2026 inflation adjustments (brackets, standard deduction, LTCG 0%/15%/20% thresholds).
• IRC §408A — Roth IRAs generally; §408A(d)(3) governs conversions as ordinary income.
• IRC §408(d)(2) — pro-rata rule for distributions from IRAs with basis.
• IRC §86 — Social Security taxability; $25k/$32k/$34k/$44k thresholds are in §86(c).
• IRC §1411 — 3.8% Net Investment Income Tax; $200k/$250k MAGI thresholds.
• IRC §1(h) — preferential rates on LTCG and qualified dividends.
• 42 USC §1395r(i) and 42 USC §1395w-113(a)(7) — IRMAA Part B and Part D surcharges (based on 2024 MAGI, paid in 2026).
• CMS Annual Notice — 2026 IRMAA brackets and monthly amounts.
• IRS Form 8606 — reporting nondeductible contributions and basis.
• IRS Publication 590-A/B — IRA contributions and distributions.

Last reviewed: September 9, 2026. For changes or corrections: corrections@rothirahub.com.