Roth Conversion 2026: What Changed Under OBBBA — and Should You Convert This Year?

Two significant changes in 2026 affect Roth conversion planning. First, the One Big Beautiful Bill Act (OBBBA, signed July 2025) made the Tax Cuts and Jobs Act individual tax rates permanent — eliminating the scheduled 2026 rate spike that drove years of "convert before rates go up" planning. Second, OBBBA added a new $6,000–$12,000 above-standard-deduction for taxpayers age 65 and older, which lowers the after-tax cost of converting for some retirees. Here is what these changes mean in practice, updated thresholds for all four conversion constraints, and a framework for deciding whether 2026 is a good year to convert.

The TCJA is permanent: what this changes for conversion planning

Since 2017, a popular Roth conversion argument was: "Convert now while TCJA rates are in effect. The sunset at end of 2025 would have raised the 22% bracket to 25%, the 24% to 28%, and compressed the 12% bracket to 15%. If that happened, the tax cost of converting would rise immediately."

That argument is now obsolete. OBBBA made the seven-bracket TCJA structure permanent — with the 2026 thresholds adjusted for inflation via IRS Rev. Proc. 2025-32.¹ There is no scheduled rate increase. The urgency was a sunset provision; the sunset was repealed.

What this means practically: Roth conversions that made sense before OBBBA still make sense, for exactly the same structural reason — you're in a lower tax bracket now (retired, pre-RMD) than you'll be when required minimum distributions start pushing your income back up. The math hasn't changed; the artificial deadline has simply been removed.

New in 2026: the OBBBA senior deduction

OBBBA added a new deduction for taxpayers age 65 and older, layered on top of the regular standard deduction and the existing 65+ additional deduction.²

How it interacts with Roth conversion. The deduction reduces your taxable income, which directly lowers the federal income tax on a conversion. A 65+ couple with $12,000 of senior deduction saves an extra $1,440 in federal tax if they're in the 12% bracket, or $2,640 if they're in the 22% bracket.

What it does not do. Because it is a below-the-line deduction, it does not reduce MAGI. That means conversion income still runs through IRMAA calculations, Social Security provisional income, and ACA subsidy eligibility at full face value. The senior deduction helps with the income-tax line on your return, not with the Medicare or marketplace triggers.

Phase-out rate amplification. If you are converting in the phase-out range ($75K–$175K single / $150K–$250K MFJ), each additional dollar of conversion reduces the senior deduction by $0.06, adding roughly 1.3 percentage points to your effective marginal rate in the 22% bracket (22% × 0.06 = 1.32%). This is a mild amplification — far smaller than the IRMAA cliff or SS torpedo — but worth including in precise calculations.

2026 Roth conversion thresholds at a glance

All four constraints that limit how much you can convert in a year are updated for 2026. Here is the full picture for married filing jointly and single filers.^1,3,4,5

IRMAA uses prior-year MAGI (2026 premiums reflect 2024 income). ACA cliff based on 2025 HHS poverty guidelines. SS torpedo thresholds are statutory under IRC § 86 and not inflation-indexed.

2026 standard deductions: total shelter before conversion begins

Before any conversion income hits a tax bracket, deductions absorb the first slice of taxable income. For 2026, a retired couple both 65+ who claim the OBBBA senior deduction can shelter $47,500 before a dollar is taxed:

• Base standard deduction (MFJ): $32,200
• Age 65+ additional ($1,650 × 2 for both spouses): $3,300
• OBBBA senior deduction (MFJ, both 65+): $12,000
• Total: $47,500 in deductions before any income reaches the 10% bracket

For a single 65+ filer: $16,100 + $2,050 + $6,000 = $24,150.

The golden window: still the prime time to convert

Nothing about OBBBA changes the fundamental Roth conversion case for pre-retirees and early retirees. The core logic holds: the years between stopping work and starting RMDs are typically the lowest-bracket years of a high-earner's adult life. Converting $100,000–$200,000 per year at 12–22% now is structurally better than paying 32% or more on mandatory distributions later — regardless of whether TCJA rates were permanent or not.

What changed is the narrative around urgency. Plans built on "we must convert before 2026 or rates spike" need to be re-framed: the reason to convert is your own bracket trajectory, not a legislative deadline. For most retirees with $1M+ traditional IRA balances, that bracket trajectory argument is if anything stronger than the sunset argument was — it's permanent math, not a temporary window.

Worked example: Tom and Karen, ages 68 and 66, 2026

Tom and Karen are both retired, no pension, Social Security delayed to age 70. They have $1.7M in traditional IRAs and no other income in 2026.

• Total deductions: $32,200 (base) + $3,300 (both 65+) + $12,000 (OBBBA senior, full amount — $0 MAGI before conversion) = $47,500
• 12% bracket room: taxable income up to $100,800. With $47,500 in deductions, they can convert $148,300 before a dollar hits the 22% bracket ($100,800 + $47,500).
• IRMAA check: MAGI of $148,300 < $218,000 IRMAA Tier 1 — no Medicare surcharge triggered.
• SS torpedo: SS not yet started — zero exposure.
• ACA: Both on Medicare — ACA cliff doesn't apply.
• Senior deduction phase-out: MAGI $148,300 < $150,000 phase-out start — full $12,000 deduction intact.
• Federal tax on $148,300 conversion: 10% on first $24,800 ($2,480) + 12% on next $76,000 ($9,120) = $11,600 total, 7.8% effective rate.

Tom and Karen converted $148,300 of traditional IRA to Roth, paid $11,600 in federal tax, and did not trigger IRMAA, the SS torpedo, or the ACA cliff. The OBBBA senior deduction saved them roughly $1,440 in federal tax compared to 2024. At that pace, they can clear $1.7M over roughly 11–12 years before RMDs begin — staying largely in the 12% bracket throughout.

Should you convert in 2026? Five questions

1. Are you in a lower bracket now than you'll be when RMDs start? For anyone retired early with a large traditional IRA, the answer is usually yes. Project your RMDs at age 73 or 75 using a calculator. If your bracket at RMD age exceeds your bracket today, the math favors conversion.

2. Does the OBBBA senior deduction apply to you? If you or your spouse are 65 or older, you get an extra $6,000–$12,000 of taxable income shelter through 2028. This makes 2025–2028 slightly cheaper for conversions than 2029 will be when the deduction expires. There is a mild "use it before it goes away" argument here — but only if the fundamental bracket math also supports converting.

3. Will this year's conversion affect your 2028 IRMAA? IRMAA uses a two-year lookback. A 2026 conversion affecting $100,000+ of MAGI will show up in your 2028 Medicare premiums. If you're not yet on Medicare, this may not matter. If you are, size your conversion to stay under the relevant tier.

4. Are you on ACA this year (pre-Medicare)? The 400% FPL cliff — approximately $84,600 MAGI for couples — still applies in 2026. Crossing it can cost $10,000–$20,000 in lost premium tax credits in a single year. If you're in the ACA years (ages 55–64, no employer coverage), the ACA cliff is often the binding constraint. Convert to the cliff, not through it.

5. Is your estate large enough that $15M matters? OBBBA made the estate exemption permanently $15M per person. For estates below $30M combined, the "convert to give heirs tax-free Roth" argument is less pressing than it was when the exemption was about to halve. However, the 10-year rule on inherited traditional IRAs still applies to most beneficiaries — children in their 40s–50s who inherit a large traditional IRA and face annual RMDs in their peak-earning years. This is still a strong motive to convert for the IRA owner, independent of the estate exemption.

2026-specific mistakes to avoid

• Continuing a "convert before rates go up" narrative. Rates are permanent. Your conversion should be driven by your personal bracket trajectory, not the former legislative sunset.
• Treating the senior deduction as MAGI relief. It reduces taxable income, not MAGI. IRMAA, SS torpedo, and ACA thresholds are all MAGI-based — the senior deduction doesn't help with any of them.
• Converting past the senior deduction phase-out without modeling the marginal rate bump. In the $150K–$250K MAGI range (MFJ), every $10K of conversion erodes the $12K deduction by $600, adding roughly 1.3% to your effective rate in the 22% bracket. Factor this into precise sizing.
• Forgetting that 2026 conversions affect 2028 IRMAA. Two-year lookback. If you're already on Medicare, model the 2028 impact before committing to a large conversion this year.

Year-end action items for 2026 conversions

Roth conversions must be completed by December 31 — there is no grace period into the following year for the conversion itself (unlike IRA contributions, which have until April 15).⁶ Steps to complete before year-end:

1. Estimate total 2026 income: pension, Social Security (if started), dividends, capital gains distributions
2. Calculate conversion ceiling using your binding constraint (IRMAA tier, ACA cliff, or 22%/24% bracket top)
3. Model the OBBBA senior deduction: will your MAGI land in the phase-out range?
4. Check IRMAA lookback: will a large conversion create a 2028 premium surcharge?
5. Submit conversion request at least 5–7 business days before December 31 (custodians get busy in late December)
6. Arrange tax payment — either from outside funds, December withholding adjustment, or quarterly estimated tax

Sources

1. IRS — 2026 Tax Inflation Adjustments (OBBBA-amended): 2026 federal income tax brackets for single and MFJ filers; standard deduction $16,100 single / $32,200 MFJ; OBBBA 4% inflation adjustment to 10% and 12% bracket thresholds; additional standard deduction age 65+ single $2,050 / MFJ per person $1,650. IRS Rev. Proc. 2025-32 as amended by the One Big Beautiful Bill Act.
2. Peter G. Peterson Foundation — Understanding the New Senior Deduction in OBBBA: $6,000 single / $12,000 MFJ (both 65+) OBBBA senior deduction; phase-out mechanics ($0.06 per $1 over $75K/$150K MAGI); below-the-line classification; 2025–2028 duration. Cross-checked against Beancount.io OBBBA Senior Bonus Deduction Guide.
3. CMS — 2026 Medicare Costs Fact Sheet: IRMAA tier thresholds for 2026 Medicare Part B and Part D; Tier 1 begins at $109,001 single / $218,001 MFJ MAGI; two-year lookback (2026 premiums based on 2024 MAGI). Surcharge: $81.20/mo Part B + $14.50/mo Part D at Tier 1.
4. IRC § 86 — Social Security Taxation Thresholds: Combined income thresholds for SS benefit inclusion: MFJ $32,000 (50% phase-in start) and $44,000 (85% phase-in start); single $25,000 and $34,000. These are statutory and not adjusted for inflation since 1993.
5. HealthCare.gov — Federal Poverty Level: ACA premium tax credit ends at 400% FPL; 2026 thresholds approximately $84,600 MFJ / $62,600 single (based on 2025 HHS poverty guidelines applied to 2026 coverage year).
6. IRS Publication 590-B — Distributions from Individual Retirement Arrangements: Roth conversion must be completed by December 31 of the tax year (IRC § 408A); no April 15 grace period; ROTH IRA contribution deadline is April 15 of following year but conversion deadline is December 31.

Tax values verified as of June 2026. 2026 income tax brackets from IRS Rev. Proc. 2025-32 as amended by the One Big Beautiful Bill Act (OBBBA, July 2025), which made TCJA rates permanent and applied a 4% inflation adjustment to the 10% and 12% bracket thresholds. OBBBA senior deduction details from PGPF and CBO analysis. IRMAA tiers from CMS 2026 fact sheet. IRC § 86 SS thresholds are statutory and have not changed since 1993.