There are a few weeks left to supersize your Roth conversion without raising your tax bill

By Beth Pinsker

Tax-law changes may allow you to increase the transaction you had planned

Tax changes may make it possible to convert more to a Roth for the same tax bill.

If you started 2025 with a plan for how much you thought you'd convert to a Roth IRA by the end of the year, the chances are you're going to end up with a different amount than you had in mind.

For most people, this year's tax-law changes mean they can convert more and yet still pay the same amount of tax as they would have otherwise. Many provisions of the omnibus tax bill that passed in July will have an impact, including an increased standard deduction, the added senior bonus deduction, changes to the state and local tax (SALT) cap, the shifting of tax-bracket amounts and coming changes to itemized deductions for high earners.

Every case will be different, though, so you have to run the numbers - and not just this year. If you're being properly strategic about tax planning, then a Roth conversion decision should always be situational and subject to change. Tax law is not the only consideration; market conditions matter, as a rising market is less advantageous for conversions than a down market because you convert fewer shares. Your personal finances matter, too - like your available cash to pay the taxes on the distribution, and your age in relation to when your income will start being evaluated for possible Medicare income-related monthly adjustment amounts (or IRMAA, at 63) or when you have to start taking required minimum distributions (RMDs, at 73).

"We probably do more than 100 Roth conversions a year for clients. As their situation changes, the amounts go up and down accordingly," said veteran financial planner David Demming, who is based in Ohio.

Here are some things to think about this year that might move the needle for your Roth calculations:

The new $6,000 senior bonus

New in 2025 is an extra $6,000 per individual, in addition to the standard deduction, for those over age 65 who meet the income limits. For a couple, this can create up to $12,000 more "room" for Roth conversions.

"I have several clients who make less than $150,000 as a couple and the new senior bonus deduction allowed them to convert $12,000 more than we had planned," said Jeremy Keil, a certified financial planner from Milwaukee. Conversely, some of his clients who make more than the thresholds - phaseouts start at $150,000 for couples, and there's no bonus for those earning over $250,000 - actually reduced their planned conversion amounts to keep their income low enough to qualify.

Some of John Nowak's planning clients in Illinois, however, are sticking with their conversion plans even if it means they don't get the bonus. "The overall tax rate may still be low or acceptable compared to future tax rates," he said. "We also educate couples that tax rates tend to increase after the first spouse passes away, because the surviving spouse moves from the married-filing-joint to single taxpayer brackets. When taxpayers are fully educated on the costs and benefits, they tend to be OK with the senior deduction phasing out for Roth conversions."

Itemized deduction limits

Those with high itemized expenses in 2025 may have an opportunity to use tax savings to fund more Roth conversions. Michael Lofley, an adviser in Florida, has clients who unfortunately had very high expenses this year because one spouse was ill. They had not been planning to do Roth conversions at all, but instead decided to convert $150,000.

"We were also trying to manage future large RMDs in single tax brackets versus married tax brackets now," Lofley said. But one thing to be mindful of is that you can only deduct qualified medical expenses that exceed 7.5% of adjusted gross income, and Roth conversions increase that. "That means the higher income can reduce the portion of medical expenses that are deductible. In this case, it was still beneficial overall, but it's important to keep an eye on it and get the CPA to sign off."

Changes are coming next year that will limit itemized deductions at the highest tax brackets. This could affect this strategy in the future, as well as how it might apply to itemized charitable giving.

SALT-cap changes

Homeowners who were restricted in deducting their real estate and local tax expenses in the last few years have a reprieve this year, opening up the possibility to convert more and still pay the same tax they were paying before. Adviser Evan Beach said he has clients in the Washington, D.C. metro area whose situations are exactly the same as last year - but the difference between a $10,000 SALT cap and a $40,000 one makes a huge difference.

"Let's say a client got an extra $15,000 deduction because of the expansion - they can convert $15,000 more with about the same tax bill," Beach said. There are some caveats, he noted, with higher Social Security taxes and surcharges for Medicare premiums being the most common.

The SALT cap can also tip people the other way toward converting less. Beach had a client who had a bonus payment that pushed him past the $600,000 threshold where the cap reverts back to $10,000. "They'll be better off pushing conversions into next year," he said.

Inherited RMD final rules

Another tax change that got settled this year was to enforce required minimum distributions for inherited IRAs. This was part of the elimination of the "stretch IRA" from the 2019 Secure Act that got delayed along the way. "Those who have been deferring taking RMDs from inherited IRAs are being forced to take them this year, leaving very little room in some situations for conversions," said Keil.

Markets rising

All of these changes are happening in a year when the stock market has been rising - the S&P 500 SPX is up over 17% - and that is a consideration for conversions, too. For Keil, the market conditions are making it easier for those who are thinking of delaying or lowering the amounts they convert.

"Thankfully, the urgency for 2025 Roth conversions isn't there, since the market is at all-time highs, and the tax brackets are no longer going up for 2026 and beyond but are now permanent," he said. "That gives us more time to do medium-level Roth conversions, instead of forcing a large Roth conversion at the lower tax rates in 2025."

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12-11-25 1000ET