How to Pay Taxes on a Roth Conversion

A Roth conversion is a taxable event — the converted amount is added to your income for the year and taxed at ordinary rates. But the mechanics of actually paying that tax bill aren't obvious, and the most common mistake — withholding taxes from the conversion itself — permanently reduces the amount in your Roth. Here's how to pay it right, and what the IRS expects for timing.

The key rule: do not withhold from the conversion

Unlike a 401(k) direct rollover (which has mandatory 20% withholding), an IRA-to-Roth conversion has no required withholding.¹ Your brokerage or custodian will ask whether you want taxes withheld. The right answer for almost everyone is no — and here's why.

Every dollar withheld from the conversion never reaches the Roth. It goes directly to the IRS, reducing the amount that enters tax-free compounding. Consider the math for Carol, age 64, converting $100,000 at 22%:

Withholding from the conversion costs Carol $85,133 in tax-free growth over 20 years — purely from reducing the initial Roth deposit. The economic effect is the same as contributing $22,000 less and paying the tax on that too.

For someone 59½ or older (who won't owe the 10% early withdrawal penalty), withholding from an IRA-to-Roth conversion is always the wrong choice when outside funds are available.

Option 1: Pay from outside funds (best choice)

The cleanest approach: fund the tax bill entirely from savings, a money market account, or a taxable brokerage. Convert the full intended amount to Roth, then pay the resulting tax through one of the timing methods below. Every dollar converted lands in the Roth.

For a $200,000 conversion at 24%, the tax due is roughly $48,000. That's real money — you need liquid assets outside retirement accounts. This is why having a taxable account or cash reserve is part of the conversion planning math. If you don't have sufficient outside funds to cover the tax, reduce the conversion amount until the tax bill matches what you can pay from non-IRA sources.

Option 2: Quarterly estimated tax payments

The IRS expects taxes on income not subject to withholding — including Roth conversions — to be paid quarterly through estimated payments.² The 2026 deadlines are:

If you convert in January, the IRS expects you to begin quarterly payments by April 15. If you convert in November, you can cover the full liability in the Q4 payment (January 15, 2027) — as long as you satisfy the safe harbor rules below.

Safe harbor: how to avoid an underpayment penalty

The IRS imposes an underpayment penalty (currently ~8% annualized) when too little is paid in throughout the year.² You avoid the penalty by meeting one of three safe harbor tests:

1. 90% of current-year tax — pay at least 90% of what you'll owe for 2026, spread across the four quarterly deadlines.
2. 100% of prior-year tax — if your 2025 AGI was $150,000 or below, pay at least 100% of your 2025 federal tax bill. Divide by four and pay quarterly.
3. 110% of prior-year tax — if your 2025 AGI exceeded $150,000 (true for nearly everyone doing meaningful conversions), you need 110% of your 2025 tax bill. Same math: divide by four, pay quarterly.³

The simplest approach for most Roth converters: calculate 110% of your 2025 tax bill, divide by four, and pay that each quarter. This protects you even if your 2026 conversion amount ends up higher than you planned — you've satisfied safe harbor regardless of the actual 2026 liability.

Exception: if you owe less than $1,000 when you file, no penalty applies regardless of quarterly payment history.

Option 3: The December withholding method

If you've missed quarterly deadlines — or simply prefer not to manage four separate payments — there's a legitimate alternative: take a separate IRA distribution in November or December and have federal income tax withheld from it. The IRS treats all income tax withholding (regardless of when it occurs in the year) as if it were paid ratably throughout the year — covering each quarterly period equally.⁴

This means a large withholding in December retroactively satisfies the Q1, Q2, and Q3 shortfalls that would otherwise trigger a penalty. The mechanics:

1. Estimate total federal tax owed for the year (conversion + other income × applicable rate).
2. Subtract any tax already withheld from other sources (W-2, pension, Social Security).
3. Take a separate IRA distribution — not from the Roth conversion — sized to make the withholding work. For example, if you need $40,000 covered and want 100% withholding, take a $40,000 IRA distribution and elect full withholding.
4. That distribution and withholding counts as income, but you've satisfied the quarterly safe harbor retroactively.

Important: This is a separate taxable IRA distribution on top of the conversion — not a way to get the tax "free." The $40,000 distribution is taxable income. But it solves the timing problem for converters who didn't make quarterly payments earlier in the year.

Who this is for: Converters who decide to do a large conversion late in the year (October–December) and haven't been making quarterly payments. The December withholding method lets you execute a year-end conversion without worrying about underpayment penalties from the earlier quarters you skipped.

Option 4: Adjust pension or Social Security withholding

If you receive pension income or have begun Social Security, you can increase withholding from those payments (using Form W-4P for pensions or Form W-4V for Social Security) to cover conversion taxes. Like December IRA withholding, pension and Social Security withholding is treated as ratably paid throughout the year, eliminating the quarterly timing problem.

This is particularly useful for retirees who have a modest pension — say, $30,000/year — and want to convert $120,000. Increasing pension withholding to cover the expected conversion tax means no separate estimated payments required.

How much to set aside: a quick calculation

For the federal tax due on a Roth conversion, a working estimate is:

Estimated tax = conversion amount × your marginal rate on the conversion dollars

But "marginal rate" requires knowing your exact bracket position. For 2026, the key MFJ thresholds after the $32,200 standard deduction ($35,500 if both spouses are 65+) are:⁵

• 12% bracket: taxable income $24,801–$100,800
• 22% bracket: taxable income $100,801–$211,400
• 24% bracket: taxable income $211,401–$291,850
• 32% bracket: taxable income $291,851–$403,550

If your other income (pension, dividends, part-time work) puts you at $50,000 in taxable income and you convert $100,000, the first $50,800 of the conversion finishes the 12% bracket and the remaining $49,200 is taxed at 22%. Your blended rate on the conversion is about 17% — not simply "22%."

Add state tax on top if your state taxes ordinary income (verify your state's rate — varies from 0% to 13.3%). See the state tax guide for state-by-state impact.

IRMAA surcharge: two years later, not now

One cost that doesn't appear on this year's tax bill is the Medicare IRMAA surcharge — which hits two years after a high-conversion year. If your 2026 MAGI (including the full conversion amount) exceeds $218,000 MFJ / $109,000 single, you'll pay higher Medicare Part B and Part D premiums starting in January 2028.⁶

This isn't a payment timing issue — it's a planning issue. Budget for it as a delayed cost of the conversion. The IRMAA surcharge can add $2,000–$15,000+ per year per couple depending on which tier you land in. Factor this into your total tax cost, not just the current-year bill.

What about 401(k)-to-Roth conversions?

If you're converting a 401(k) or 403(b) balance directly to a Roth IRA, the mechanics differ. Most plan administrators are required to withhold 20% from distributions (per IRC § 3405(c)) unless you elect a direct rollover to the Roth IRA.⁷

The solution: request a direct rollover to the Roth IRA — not a distribution paid to you. With a direct rollover, no mandatory withholding applies, and the full amount transfers. See the 401(k) to Roth conversion guide for the step-by-step process and how to avoid the withholding trap.

The practical checklist

• When initiating the conversion, elect zero withholding.
• Know your safe harbor number: 110% of your prior-year tax bill if your prior-year AGI exceeded $150,000.
• Either make quarterly estimated payments (IRS Direct Pay or EFTPS) or plan a December IRA distribution with full withholding to cover the liability.
• Keep liquid funds outside retirement accounts equal to at least the estimated tax due. Don't plan to pay conversion taxes from future IRA withdrawals — that creates a second taxable event.
• For state taxes: check whether your state's estimated tax deadlines and safe harbor rules differ from federal. Most states follow a similar quarterly schedule, but thresholds vary.
• After the year ends: file Form 8606 to report the conversion and update your Roth basis records. If you used the annualized income installment method on Form 2210, attach it to your return.