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Roth Conversion: Fill Your Bracket, Avoid Medicare Surcharges
Converting too little leaves savings on the table; too much can push you into a higher bracket or trigger Medicare surcharges. Planners explain how to calculate the right Roth conversion amount.
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A Roth conversion lets a taxpayer shift money from a traditional IRA into a Roth IRA, locking in tax-free withdrawals later and skirting required minimum distributions. The amount converted counts as ordinary income that year. That makes the size of the conversion the central decision.
Planners recommend converting just enough to fill the current marginal tax bracket without pushing into the next one. A single filer with $80,000 in gross income and a $16,100 standard deduction ends up with $63,900 in taxable income, sitting inside the 22% bracket. The top of that bracket for 2025 is $105,700. That leaves $41,800 of room before the 24% bracket starts. A conversion of roughly that amount would keep the taxpayer at the same marginal rate, advisers said.
For taxpayers near or over 65, Medicare premium surcharges add a second constraint. The Social Security Administration uses modified adjusted gross income from two years prior to determine whether a beneficiary owes IRMAA. A single filer with 2024 MAGI above $109,000 faces IRMAA in 2026. For married couples the threshold is $218,000. A Roth conversion raises MAGI in the conversion year, so a large conversion could push the taxpayer over the line two years later, planners said.