Year-End Roth Conversion Deadline: How to Calculate the Right Amount Before December 31

A Roth conversion done in December must settle by December 31 of that calendar year. There are no extensions, no grace periods, and no way to apply a January conversion retroactively to the prior tax year. The calculation requires estimating your full-year taxable income, identifying how much bracket space remains, and accounting for the two-year IRMAA lookback before you instruct your custodian to move the money.

## Why December 31 Is a Hard Deadline

Unlike IRA contributions (which can be made until the April 15 tax-filing deadline), Roth conversions are reported in the calendar year they occur.

Technical detail

IRC Section 408A(d)(3). A conversion is taxable in the year the distribution from the traditional IRA is made, not the year the funds arrive in the Roth account.

If the custodian processes your conversion on January 2, it counts for the following tax year -- there is no way to recharacterize it backward.

Most custodians need 3 to 5 business days to process a conversion. That means the practical deadline is mid-to-late December, not December 31 itself. If you wait until December 30 and your custodian is closed for the holiday, the conversion does not happen. Call your custodian in early December to confirm their processing timeline and any blackout periods around the holidays.

## Step 1: Estimate Your Full-Year Taxable Income

Before you can calculate the right conversion amount, you need a reasonable estimate of where your taxable income will land without the conversion. By mid-November, most of the variables are known or knowable.

Gather these items:

• Wages, pension, and Social Security: Your year-to-date pay stubs, pension statements, and SSA-1099 (or estimate based on monthly benefit times 12)
• Investment income: Dividends and interest paid through November, plus an estimate for December. Check for any capital gain distributions your mutual funds plan to make in December -- fund companies publish estimates in late October or early November
• Capital gains or losses: Any realized gains from selling securities or property during the year. Net capital losses offset gains, and up to $3,000 of excess losses offset ordinary income IRC Section 1211(b)
• Required Minimum Distributions (RMDs): If you are 73 or older (or 75 for those born in 1960 or later under SECURE 2.0), your RMD is ordinary income. It must be taken before conversion IRS Publication 590-B. The RMD for the year must be satisfied first; you cannot convert the RMD portion.
• Deductions: Standard deduction ($32,200 for MFJ, $16,100 for single in 2026) or itemized deductions if higher. Include any above-the-line deductions like HSA contributions or self-employment adjustments

Add these up, subtract your deductions, and you have your estimated taxable income before conversion.

Example: Margaret, Age 66, Widowed

Margaret retired at 63. She collects $28,000 in Social Security, has $18,000 in dividends and interest from a taxable brokerage account, and has no other income. She files as single.

Margaret is currently in the 12% bracket. The 12% bracket for single filers in 2026 ends at approximately $50,400. She has roughly $24,750 of bracket space ($50,400 minus $25,650) available to fill with a Roth conversion at 12%.

If she is comfortable paying tax at 22%, the 22% bracket extends to approximately $105,700 for single filers, giving her an additional $55,300 of space in that bracket. Whether to fill part or all of the 22% bracket depends on her expected future tax rates and the IRMAA considerations discussed below.

## Step 2: Decide Which Bracket to Fill

The bracket-filling strategy is the core of year-end Roth conversion planning. The goal is to convert enough to fill a bracket that is lower than the rate you expect to pay in the future, and to stop before you spill into a bracket that is higher than your future rate.

2026 federal income tax brackets (single filer):

Technical detail

Tax Foundation, 2026 Federal Income Tax Brackets. These are approximate and subject to IRS inflation adjustments published in Revenue Procedure 2025-XX.

2026 federal income tax brackets (married filing jointly):

For most retirees, the 12% and 22% brackets are the target zones. Converting at 12% is almost always worthwhile unless you expect to be in the 10% bracket permanently. Converting at 22% makes sense if you expect RMDs, Social Security stacking, or the widow(er)'s tax penalty to push you into the 24% bracket or higher within a few years.

The Widow(er)'s Bracket Compression

Widowed individuals face a particularly strong case for year-end Roth conversions. In the year a spouse dies, the surviving spouse can file jointly. After that, they typically drop to single filing status (unless they qualify for Qualified Surviving Spouse status with a dependent child). The single brackets are roughly half the width of MFJ brackets, meaning the same income is taxed at higher rates.

If you are recently widowed and still in a transition year where your filing status is favorable, the bracket space available now may be significantly larger than what you will have next year. This makes year-end conversion especially valuable.

Step 3: Check the IRMAA Two-Year Lookback

Medicare's Income-Related Monthly Adjustment Amount (IRMAA) adds surcharges to your Part B and Part D premiums based on your Modified Adjusted Gross Income (MAGI) from two years prior. Social Security Act Section 1839(i). IRMAA is determined using the tax return from two years before the current year. A Roth conversion in 2026 affects your 2028 Medicare premiums.

2026 IRMAA thresholds (using 2024 MAGI):

CMS: 2026 Medicare Part B Premiums. Thresholds are approximate and updated annually.

IRMAA operates as a cliff: exceeding a threshold by $1 costs the full surcharge for the entire year. For a single filer, crossing from $106,000 to $106,001 in MAGI adds $81.20 per month, or $974.40 per year, in Part B surcharges alone. Part D surcharges add another $166 to $420 per year depending on the tier.

How to account for IRMAA in your conversion calculation:

1. Start with your estimated 2026 MAGI (income before the conversion, plus the conversion amount)
2. Check which IRMAA tier that total falls into, looking at the 2028 IRMAA thresholds (which will be based on 2026 MAGI)
3. If adding the full bracket-filling conversion amount pushes you over an IRMAA cliff, reduce the conversion to stay just below it -- unless the tax savings from the conversion exceed the IRMAA surcharge cost

For Margaret in the earlier example, her MAGI before conversion is about $41,800. Even adding a $64,000 conversion (filling through the 22% bracket) brings her to roughly $106,000 -- right at the first IRMAA threshold. She might size the conversion to $63,000 to stay safely below the cliff and avoid $974 in annual Part B surcharges two years later.

Step 4: Factor in State Taxes

Roth conversions are taxed as ordinary income by most states that have an income tax. The state tax cost can significantly change the math.

States with no income tax (where conversion has zero state cost): Alaska, Florida, Nevada, New Hampshire (fully exempt starting 2027), South Dakota, Tennessee, Texas, Washington, Wyoming.

High-income-tax states where the conversion cost is notably higher:

• California: up to 13.3% on ordinary income
• New York: up to 10.9% (plus NYC surcharge of up to 3.876%)
• New Jersey: up to 10.75%
• Oregon: up to 9.9%

If you plan to move from a high-tax state to a no-tax state in retirement, consider whether delaying the conversion until after the move makes sense. A $100,000 conversion in California costs an extra $9,300 to $13,300 in state tax compared to the same conversion in Florida.

However, if you expect to be in a higher federal bracket later, the federal savings may outweigh the state cost. Run both scenarios before deciding.

Step 5: Run the Numbers with Provisional Income

Roth conversions increase your provisional income, which determines how much of your Social Security benefits are taxable. IRC Section 86. Provisional income = AGI + tax-exempt interest + 50% of Social Security benefits. This creates a hidden multiplier effect: every dollar of conversion can make up to 85 cents of Social Security benefits newly taxable.

For single filers:

• Below $25,000 provisional income: Social Security is not taxable
• $25,000 to $34,000: Up to 50% of benefits become taxable
• Above $34,000: Up to 85% of benefits become taxable

For MFJ filers, the thresholds are $32,000 and $44,000.

If you are near the $34,000 threshold (single), a Roth conversion can push you over it, making 85% of your Social Security taxable instead of 50%. On a $28,000 Social Security benefit, the difference between 50% and 85% taxability is $9,800 in additional taxable income. At the 22% bracket, that adds $2,156 in federal tax on top of the tax on the conversion itself.

This does not mean you should avoid the conversion. It means the effective marginal tax rate on the conversion is higher than the stated bracket rate. A conversion that looks like it costs 22% might actually cost 22% plus the tax on the newly taxable Social Security, pushing the effective rate to 28% or higher. Factor this into your bracket-filling decision.

When to Wait Instead of Converting

Year-end Roth conversion is not always the right move. Several situations favor waiting:

• Your income is unusually high this year. If you sold a business, exercised stock options, or had a one-time capital gain that pushed you into the 32% or 37% bracket, converting on top of that income means paying a rate you would not normally face. Wait for a lower-income year.
• You expect a significant income drop next year. Job loss, full retirement, or a gap year before Social Security starts can create a much larger low-bracket window next year. Converting this year at 22% when you could convert next year at 12% is a $10,000 difference on a $100,000 conversion.
• You are between 60 and 65 and on ACA health insurance. Conversions increase your household income for Premium Tax Credit purposes. If the enhanced ACA subsidies have expired and the cliff is back, exceeding 400% of the Federal Poverty Level by $1 can cost $20,000 or more in lost subsidies. IRC Section 36B.
• You have large medical expenses or charitable deductions planned for next year. These deductions can offset the tax on future RMD income, reducing the benefit of having converted.
• You are moving to a no-income-tax state next year. Waiting one year to convert saves the entire state tax bill on the conversion amount.

December Logistics: How to Execute

Once you have determined the conversion amount, the mechanical steps are straightforward but time-sensitive.

1. Confirm your RMD is satisfied. If you are subject to RMDs, the full RMD for the year must be distributed before any conversion. The IRS treats the first dollars out of a traditional IRA as the RMD until the requirement is met. Treasury Regulation 1.408-8, Q&A-2.
2. Contact your custodian by the first week of December. Ask for their conversion processing timeline and any year-end cutoff dates. Some custodians stop processing conversions as early as December 20.
3. Specify the conversion amount. Give an exact dollar amount, not "fill up the 22% bracket." Your custodian does not know your tax situation.
4. Do not withhold taxes from the conversion. Pay the tax from a separate checking or brokerage account. Withholding from the conversion reduces the amount going into the Roth and may trigger a 10% early withdrawal penalty on the withheld amount if you are under 59 1/2. IRS Publication 590-A.
5. Get written confirmation. Confirm in writing that the conversion will settle by December 31. A conversion initiated on December 28 that does not settle until January 2 counts as a next-year conversion.

Estimating the Tax Bill

You will owe federal income tax on the full conversion amount (assuming all traditional IRA funds are pre-tax). The tax is due when you file your return the following April, or through estimated tax payments.

If you have not made sufficient estimated payments or withholding to cover the conversion tax, you may owe an underpayment penalty. IRC Section 6654. The safe harbor: pay at least 100% of last year's total tax liability (110% if your AGI exceeds $150,000) through withholding and estimated payments to avoid the penalty, even if you owe additional tax from the conversion.

Quick Tax Estimate for Margaret's Conversion

Margaret decides to convert $60,000 (staying below the IRMAA cliff):

*The tax she would owe without the conversion is roughly $2,060, so the conversion adds approximately $11,500 in federal tax. At an average rate of about 19.2% on the conversion amount, this is well below what she would likely pay on RMDs stacked on top of Social Security in future years.

## The Pro-Rata Rule: Check Before You Convert

If you have ever made non-deductible (after-tax) contributions to a traditional IRA, you cannot selectively convert only the after-tax portion. The IRS applies the pro-rata rule, treating all your traditional, SEP, and SIMPLE IRAs as a single pool.

Technical detail

IRC Section 408(d)(2). The taxable fraction is calculated using the total balance of all traditional IRAs on December 31 of the conversion year.

The taxable percentage of any conversion is:

(Total pre-tax balance across all traditional IRAs) / (Total balance across all traditional IRAs) x 100

If 90% of your combined IRA balance is pre-tax, then 90% of any conversion is taxable -- regardless of which specific IRA you convert from. The December 31 balance is what matters, so a large contribution or rollover near year-end can change the ratio.

If you have significant after-tax IRA basis, consider rolling your pre-tax IRA funds into a 401(k) plan (if your employer allows incoming rollovers) before converting. This isolates the after-tax basis in the traditional IRA, allowing you to convert it to Roth with minimal tax.