Should You Do a Roth Conversion Before December 31, 2026?

Only if the tax you pay on the conversion this year is likely to be lower than the tax you or your heirs would pay on that money later. A conversion moves pre-tax money from a traditional IRA into a Roth IRA, and the untaxed amount is ordinary income in the year of the transfer (IRS Publication 590-A). For a 2026 conversion, the money has to leave the traditional IRA by December 31, 2026, and once it does, the decision is final.

That makes November the right month to look at the question. You know most of your 2026 income by now, the brackets are set, and there's still time for the custodian to process a transfer.

This is general education, not advice for your specific situation.

Why isn't 2026 the deadline it used to be?

For several years the argument for converting was urgency: the lower rates from the 2017 tax law were scheduled to expire after 2025. That expiration didn't happen. The 2025 tax law, H.R. 1, made the 10%, 12%, 22%, 24%, 32%, 35% and 37% individual rates permanent and permanently raised the standard deduction (Congress.gov, H.R. 1 summary, Secs. 70101–70102).

Congress can always change rates again, but there's no scheduled increase to beat. The case for a 2026 conversion now rests on the same thing it always should have: the rate you'd pay today compared with the rate that money would face when it eventually comes out of the account.

How is a Roth conversion taxed in 2026?

The IRS treats a conversion as a rollover. You include in gross income the part of the distribution that would have been taxable if you'd simply withdrawn it, and you report the conversion on Form 8606 (IRS Publication 590-A; IRS IRA FAQs). Any after-tax basis in your traditional IRAs comes out tax-free, but Form 8606 measures that basis against the total year-end value of all your traditional, SEP and SIMPLE IRAs, not just the account you convert from (IRS Form 8606 instructions).

The income lands on top of everything else you earned in 2026, so the bracket it falls into is what matters. For 2026, the thresholds set by Revenue Procedure 2025-32 are (IRS):

The 2026 standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, which is what separates your adjusted gross income from taxable income if you don't itemize.

A worked example: filling the 24% bracket

Say a Houston couple files jointly and expects $300,000 of taxable income in 2026 before any conversion. The 24% bracket runs to $403,550, which leaves $103,550 of room.

The first $100,000 costs 24 cents on the dollar. The next $50,000 costs 32 cents. Whether either is a good deal depends on the rate you expect that money to face in retirement or in your heirs' hands. Texas has no state income tax, so for Houston residents the federal figure is the whole bill. If you expect to retire to a state that taxes retirement income, converting while you're still a Texas resident can matter; our post on Texas residency planning covers the related issues.

What else does the extra income touch?

A conversion raises your adjusted gross income, and a surprising number of 2026 provisions key off that figure rather than your tax bracket.

• Medicare premiums two years later. Social Security sets income-related adjustments using the most recent return the IRS provides, generally the return filed two years earlier (SSA). The 2026 surcharges begin above $109,000 of modified AGI for an individual and $218,000 for a joint return, and the standard Part B premium of $202.90 rises to $284.10, $405.80, $527.50, $649.20 or $689.90 per person per month depending on the tier (CMS). A 2026 conversion will show up in your 2028 premiums. The 2028 thresholds will be indexed and aren't published yet, but the structure is the same: crossing a line by one dollar triggers the full tier.
• The $6,000 senior deduction. For 2025 through 2028, each person 65 or older can claim an additional $6,000 deduction, and it phases out once modified AGI exceeds $75,000, or $150,000 on a joint return (IRS). A conversion can consume it.
• The SALT cap. The $40,400 deduction for state and local taxes, including Harris County property tax, phases down above $505,000 of modified AGI. Our post on the 2026 Texas property tax deduction walks through that math.
• Net investment income tax. IRA distributions, including conversions, aren't themselves investment income, but they count in the modified AGI tested against the $200,000 single and $250,000 joint thresholds, which aren't indexed (IRS NIIT Q&A). A conversion can expose dividends and gains to the 3.8% tax that would otherwise have escaped it.

None of these are reasons never to convert. They're reasons to run the full return projection, not just the bracket table.

Who tends to benefit from converting in 2026?

• People in a temporarily low-income year. A sabbatical, an early retirement before Social Security and required distributions start, or a year with a large business loss can open bracket room that won't exist later. The year-end tax planning checklist covers how a conversion fits with your other December moves.
• Owners who don't want required distributions. You aren't required to take distributions from your own Roth IRA at any age (IRS Publication 590-B). Traditional IRA owners must start by the year they turn 73.
• Families whose heirs are in high brackets. Most non-spouse beneficiaries of an owner who dies after 2019 must empty the inherited account by the end of the tenth year after death (IRS Publication 590-B). Ten years of forced traditional IRA distributions on top of a working child's salary can be taxed at 32% to 37%. An inherited Roth IRA still has to be emptied in ten years, but the distributions are generally tax-free.
• People who can pay the tax from outside the IRA. Paying the tax from taxable savings leaves the full converted amount growing tax-free.

When should you pause?

• You'd have to pay the tax from the IRA itself. Any amount you keep back to cover the tax is a regular distribution. It's taxable, and if you're under 59½ it may also owe the 10% additional tax (IRS Publication 590-A).
• You might need the converted money within five years. Each conversion has its own 5-year period starting January 1 of the conversion year. If you're under 59½ and withdraw the converted amount inside that window, the taxable portion is generally subject to the 10% additional tax (IRS Publication 590-B).
• You're one dollar from a Medicare tier, the senior deduction phase-out or the SALT phase-down. Convert a smaller amount, or convert up to the line and stop.
• You expect a lower-income year soon. A planned retirement in 2027 or 2028 may offer more bracket room than 2026 does.
• The amount is a required minimum distribution. You can't convert amounts that must be distributed for the year, including the year you reach 73 (IRS Publication 590-A). Take the RMD first.

How do you pay the tax without a penalty?

The conversion tax is due with your 2026 return, but the IRS expects payments through the year. You generally avoid an underpayment penalty if your withholding and estimated payments reach 90% of your 2026 tax or 100% of your 2025 tax, and the 100% becomes 110% if your 2025 adjusted gross income was over $150,000 (IRS Publication 505). Two practical ways to get there:

1. Make a fourth-quarter estimated payment by January 15, 2027. Because estimated payments are measured by quarter, a large December conversion can still produce a penalty for earlier quarters unless you use the annualized income installment method on Form 2210 (IRS Publication 505).
2. Increase withholding from a paycheck, pension or Social Security benefit before year-end. The IRS treats one-fourth of your withholding as paid in each quarter unless you elect otherwise, which avoids the quarterly problem (IRS Publication 505).

If you're also moving an old 401(k) this year, keep the two transactions separate. Our post on rolling an old 401(k) into an IRA explains how a rollover can accidentally become a conversion.

A December 31 checklist for a 2026 conversion

• Project your 2026 taxable income and modified AGI with all known items, including bonuses, capital gains and K-1 income.
• Decide the bracket you're willing to fill and the amount that fills it.
• Check the Medicare, senior deduction, SALT and net investment income thresholds against the projected modified AGI.
• Confirm your after-tax IRA basis from prior Forms 8606 so the pro-rata calculation is right.
• Take any 2026 required minimum distribution first.
• Submit the conversion with enough time for your custodian's year-end cutoff, and pay the tax from outside the IRA.
• Plan the estimated payment or withholding so you meet the safe harbor.

If you have after-tax money in a 401(k), a different route may be available; see our post on the mega backdoor Roth.

How can Mercer Street help?

At Mercer Street, we model conversion scenarios in a working session: how much to convert in 2026, what it does to your federal tax, your 2028 Medicare premiums and your other phase-outs, and how it compares with converting over several years. You leave with the number and the reasoning to hand to your custodian and your tax preparer. We don't prepare tax returns.

Mercer Street's work is billed at $600 per hour with a 2-hour minimum ($1,200). Our services page explains how engagements work, and our FAQ answers common questions about working with us.

If you want to settle your 2026 conversion before the custodian cutoffs arrive, schedule a free fit meeting. Fit meetings are virtual, and we can talk through whether a focused review makes sense for you.