Roth IRA Conversions Under Trump’s Megabill

The Wall Street Journal reports that the rush to do Roth IRA conversions before year-end has slowed.

“Instead of allowing current tax rates to rise in 2026 as scheduled, Congress made them ‘permanent’—so they’re probably good through 2028.”

That means savers don’t need to race against the clock this year. Still, the article notes, “this could be a good year for many would-be converters to act,” though the megabill makes the math more complicated.

“There are more moving parts than ever, and it’s hard to eyeball the right steps,” says Ryan McKeown, a CPA with Wealth Enhancement Group.

The basic rule remains unchanged: savers can convert traditional IRAs into Roth IRAs, but the converted amount is taxed as ordinary income.

“The conversion amount is taxable at ordinary income rates. This means accelerating a tax bill and paying it at the saver’s top marginal rate in hopes of reaping a reward later. Ouch.”

The WSJ highlights several factors worth weighing:

• Future tax rates: “Taxes seldom go down.”

• Required withdrawals: Large IRAs at age 73 can trigger “the 3.8% surtax on certain investment income or ‘Irmaa’ premiums for Medicare.”

• State taxes: A conversion before moving to a low-tax state “probably isn’t smart.”

• Heirs: A Roth can help “reduce the ‘widow’s penalty’” or avoid high taxes for children inheriting accounts.

The megabill also layers in new provisions starting in 2025:

• SALT deductions:

  “If your income increases from $500,000 to $600,000 because of a Roth conversion, the loss of the SALT deduction raises the effective federal tax rate on the $100,000 conversion to 45.5%,” says Robert Keebler, CPA.

• Charitable contributions:

  “Next year will bring a new limit for itemized charitable deductions… This new limit will prompt many who itemize to accelerate future donations into 2025.”

• Senior deduction:

  “Beginning in 2025, the megabill added a $6,000 deduction per person age 65 or older… [but] the new senior deduction begins to phase out at $75,000 for single filers and $150,000 for joint filers.”

• Bonus depreciation:

  “Such deductions can provide shelter for Roth conversions… and they don’t raise AGI.”

Final word

The mechanics of Roth conversions haven’t changed, but the context around them has. With more moving parts in play, the decision is less about racing the calendar and more about running careful tax projections.

Source: Wall Street Journal – How Trump’s Megabill Affects Roth IRA Conversions