What the new 2026 tax brackets mean for Roth IRA conversions

By Beth Pinsker

There are a few simple steps to calculate if taking money out of your IRA is worth the tax bite

Your Roth conversion decision starts with figuring out where you are in a tax bracket.

If you're in early retirement - or close to it - you don't want to gloss over the announcement of new tax brackets for 2026 as next year's problem. While there's not much surprise to the numbers, which essentially inch up to account for inflation, you can start to cement a plan now for your future income and the taxes you pay.

The steps to figure out whether you should convert money from a traditional IRA to a Roth in 2026 and how much are fairly straightforward. A Roth conversion benefits those whose tax rates are lower now than they will likely be in the future. That sets up a scenario where you'd want to take money out of tax-deferred accounts, pay the tax in the current year on the withdrawal and move the money into a Roth IRA account where it will continue to grow tax-free. This is not a move everyone will want to make, but it can help some retirees mitigate their taxes down the road, because it helps lower their required minimum distributions and allows them to have tax-free income later on.

The demographic most affected is early retirees who were relatively high earners in their working years - maybe in the 24% to 37% brackets. When they retire, they could drop down to the 22% bracket or lower. If they have significant IRA savings, RMDs could eventually push them back up into higher tax brackets once they turn 73, which, in turn, would force them to pay more tax on their Social Security income and pay Medicare's IRMAA surcharges. If they were to convert now, they'd be paying less tax on the money than in the future.

Figuring out how much to convert is where tax brackets come into play, because it sets parameters for the mathematical analysis. Financial advisers who help clients with Roth-conversion strategies typically look at the person's current income and see where they are in that particular tax bracket. Then they see if there's "room" to get right up to the edge of the next tax bracket - without going over - and that amount is what they advise taking out of the IRA to convert to Roth, paying the tax with cash on hand.

For instance, here are the 2026 brackets for married couples filing jointly.

   Married filing jointly  Taxable income                The tax is: 
   10%                     Not over $24,800              10% of the taxable income 
   12%                     Over $24,800 up to $100,800   $2,480 plus 12% above $24,800 
   22%                     Over $100,800 up to $211,400  $11,600 plus 22% above $100,800 
   24%                     Over $211,400 up to $403,550  $35,932 plus 24% above $211,400 
   32%                     Over $403,550 up to $512,450  $82,048 plus 32% above $403,550 
   35%                     Over $512,450 up to $768,700  $116,896 plus 35% above $512,450 
   37%                     Over $768,700                 $206,583.50 plus 37% above $768,700 

If your income is $100,800, you are in the 22% bracket, and you could convert $110,600 without tipping over into the 24% bracket.

There are some special circumstances that apply starting in 2026. For one, the standard deduction is going up to $16,100 per individual, up from $15,750, and there's an additional standard deduction for seniors over 65 of $6,000 per person. This will create even more room in each tax bracket for people in that age group, as these sums are deducted from gross income to get to the amount on which the tax is based.

How the numbers work

The two main numbers you're looking at are ordinary income and total taxable income - commonly referred to as adjusted gross income or AGI. Financial planners Cody Garrett and Sean Mullaney, co-authors of the new book, "Tax Planning to and Through Retirement," ran one of their book scenarios with the new 2026 numbers for MarketWatch. Generally speaking, if a couple's total income is equal to or less than the standard deduction and the senior deduction, and total taxable income is $98,900 or less, then they could do a Roth conversion of a little over $40,000 and pay no federal income tax.

Here's how that looks for their example of Robert and Natasha, who are both 65. They have the following income:

-- Taxable interest: $2,000

-- Nonqualified dividends: $4,000

-- Qualified dividends: $10,000

-- Long-term capital gains: $88,000

They want to take a Roth conversion of $41,500. That would give them an adjusted gross income of $145,500 after subtracting $32,200 for the standard deduction, $1,650 each for the additional standard deduction for their age group and $6,000 each for the new additional senior deduction. That leaves their taxable income at $98,000, which is all taxed at the 0% long-term capital-gains rate.

The bottom line, said Garrett and Mullaney, is that this renders their federal tax as 0%.

How is that possible?

"The combined ordinary taxable income from the Roth conversion, taxable interest, and nonqualified dividends of $47,500 is completely wiped out by the total available deductions," they said. "The remaining taxable income of $98,000 from qualified dividends and long-term capital gains is taxed as favorable long-term capital gains income, falling within the 0% LTCG bracket (up to taxable income of $98,900 married filing jointly)."

To run these numbers for your own scenario, you can consult with a financial planner or follow the model and substitute your own numbers. If you're single or a head of household, you must use different charts for the tax brackets and standard deductions. It's not hard math, but it takes some diligence to map out the numbers and sift through more than one projection until you get to the right answer for your own situation.

"Americans in their mid-to-late 60s have a great Roth conversion opportunity," said Garrett. "The high standard deduction in 2026 presents a great opportunity to consider Roth conversions, including those that cause no additional federal income tax."

Got a question about investing, how it fits into your overall financial plan and what strategies can help you make the most out of your money? You can write to me at beth.pinsker@marketwatch.com. Please put "Fix My Portfolio" in the subject line.

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-Beth Pinsker

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10-10-25 1034ET