A conversion is income you choose to create
Moving money from a traditional IRA to a Roth IRA is treated as a distribution followed by a contribution. The distribution is ordinary income in the year you make it; the Roth account then grows and is withdrawn tax-free if the usual qualified-distribution conditions are met. Nothing is forced on you: you pick the amount, and the amount picks the tax bill.
That controllability is what makes conversions a planning tool rather than a transaction. The classic use is the gap years — after you stop working and before Social Security and required minimum distributions begin — when taxable income is unusually low and the lower brackets sit empty. Filling those brackets deliberately converts money at 10%, 12% or 22% that would otherwise come out later at a higher rate, possibly as a forced required minimum distribution.
The number to focus on is the effective rate on the conversion — total additional tax divided by the amount converted — not your top bracket. A conversion that starts in the 12% bracket and finishes in the 22% one has an effective rate somewhere between the two, and that blended figure is what you compare against the rate you expect to pay later.
Two calculations, not one rate
The tax cost is a difference: the tax you owe with the conversion minus the tax you owe without it. It cannot be found by multiplying the conversion by a single rate, because the conversion is stacked on top of your existing income and often spans a bracket boundary.
Start by working out your taxable income without the conversion: other income minus deductions, floored at zero. Apply the rate schedule to get the baseline tax. Then add the taxable conversion, apply the schedule again, and subtract. Everything the calculator reports as federal tax is that difference.
The pro-rata rule of IRC section 408(d)(2) decides how much of the conversion is taxable at all. If you have ever made a nondeductible contribution, you have basis, tracked on Form 8606. The rule says every distribution — including a conversion — carries basis and pre-tax money in the same proportion as your aggregate IRA holdings. The taxable fraction is 1 − basis ÷ total balance, where the total is every traditional, SEP and SIMPLE IRA you own at year end, plus distributions made during the year. You may not designate the after-tax dollars as the ones being converted.
This is exactly what defeats a naive backdoor Roth. Contributing $7,000 nondeductibly and converting it immediately looks tax-free, and it is — but only if that $7,000 is your entire IRA balance. Hold $393,000 of pre-tax money alongside it and the taxable fraction is 1 − 7,000 ÷ 400,000 = 98.25%, so $6,877.50 of the conversion is taxable income. The rule aggregates across accounts and across institutions, and it does not look at 401(k) balances, which is why rolling pre-tax IRA money into an employer plan is the standard remedy.
Worked example: $50,000 converted on $120,000 of income, married filing jointly
Using the calculator's defaults and the 2025 married-filing-jointly schedule, with no after-tax basis and a 5% state rate.
- Baseline taxable income. $120,000 − $30,000 standard deduction = $90,000.
- Baseline federal tax. 10% on the first $23,850 = $2,385. The remaining $66,150 falls in the 12% band (which runs to $96,950) = $7,938. Total $10,323.
- Add the conversion. Taxable income becomes $90,000 + $50,000 = $140,000.
- New federal tax. $2,385 at 10%; the full 12% band is now used, $96,950 − $23,850 = $73,100 at 12% = $8,772; and $140,000 − $96,950 = $43,050 at 22% = $9,471. Total $20,628.
- Federal cost. $20,628 − $10,323 = $10,305.
- Split it by bracket. The first $6,950 of the conversion filled the rest of the 12% band ($96,950 − $90,000) at a cost of $834; the remaining $43,050 was taxed at 22% for $9,471. Those two add to $10,305, which confirms the difference calculation.
- State tax. 5% × $50,000 = $2,500.
- Effective rate. ($10,305 + $2,500) ÷ $50,000 = 25.61% — below the 27% you would get by adding the 22% federal and 5% state marginal rates, because part of the conversion was still taxed at 12%.
- Room remaining. The 22% band runs to $206,700, so a further $66,700 of income would still be taxed at 22%.
Step 9 is the planning number. If your view is that 22% is an acceptable rate, you could convert an additional $66,700 this year at exactly that rate before reaching 24%. If instead you wanted every dollar at 12%, the conversion should have been $6,950 rather than $50,000.
The rate comparison that decides it, and what the calculator misses
The decision rule is simple to state: convert when the rate you pay now is lower than the rate you expect to pay on the same dollars later. Everything else — growth rates, time horizons, account size — drops out of the algebra, because a Roth and a traditional account with identical returns differ only by the tax rate applied at each end.
The comparison is harder than it sounds, because the later rate is not simply your future bracket. Traditional balances become required minimum distributions in your seventies, and those distributions are forced income that can push you into a higher bracket than you would otherwise occupy. For a surviving spouse the same income arrives against the single schedule, whose brackets are roughly half as wide. And under the 10-year rule, a non-spouse heir may have to empty an inherited traditional IRA during their own peak earning years — the inherited IRA RMD calculator shows the shape of that.
Pay the tax from outside the IRA if you possibly can. Using converted dollars to cover the bill shrinks the amount that reaches the Roth, and if you are under 59½ the withheld portion is itself a distribution subject to the 10% additional tax. Paying from a taxable account effectively moves that money into the Roth wrapper at no tax cost, which is the quiet second benefit of a conversion.
Three effects this calculator deliberately does not model, all of which can raise the true cost. Medicare income-related premium adjustments are based on income from two years earlier and step up at thresholds, so a conversion at 63 can raise premiums at 65. Social Security taxation is a function of combined income, so additional income can make more of the benefit taxable and produce marginal rates above the headline bracket. Marketplace premium credits phase out with income, which can make a conversion very expensive for an early retiree buying coverage. Each of these is a threshold effect rather than a rate, and each deserves its own check.
2025 federal rate schedule used by this calculator
| Rate | Single | Married filing jointly |
|---|---|---|
| 10% | $0 – $11,925 | $0 – $23,850 |
| 12% | $11,925 – $48,475 | $23,850 – $96,950 |
| 22% | $48,475 – $103,350 | $96,950 – $206,700 |
| 24% | $103,350 – $197,300 | $206,700 – $394,600 |
| 32% | $197,300 – $250,525 | $394,600 – $501,050 |
| 35% | $250,525 – $626,350 | $501,050 – $751,600 |
| 37% | Over $626,350 | Over $751,600 |
The 2025 standard deduction was $15,000 for single filers and $30,000 for married couples filing jointly. Source: IRS Revenue Procedure setting the 2025 inflation adjustments.
Rules and traps worth knowing before you convert
- Conversions cannot be undone. Recharacterisation of a conversion was repealed for tax years after 2017, so a conversion made in a falling market stays made. Convert in instalments if that risk concerns you.
- Each conversion starts its own five-year clock for penalty-free access to the converted principal before age 59½. This is separate from the five-year clock governing qualified distributions of earnings.
- The pro-rata rule aggregates every traditional, SEP and SIMPLE IRA you own, at every institution. Employer plan balances are not included, which is what makes a rollover into a 401(k) the standard fix before a backdoor Roth.
- Withholding from the conversion is a distribution. Ask for zero withholding and pay from taxable savings, or the withheld amount never reaches the Roth and may itself be penalised under 59½.
- Estimated tax may be due. A large conversion can trigger underpayment penalties unless you increase estimated payments or wage withholding in the same year.
- State treatment varies. Some states do not tax retirement income at all, and a few tax it differently from wages. The flat rate used here is an approximation; check your own state's rules.
Sizing a conversion, and where it fits
The practical technique is bracket filling. Decide the highest rate you are willing to pay, find the top of that bracket, and convert exactly the difference between it and your projected taxable income. That converts the maximum possible at a known rate and not a dollar more. The room-in-bracket output above is that number, recalculated as you change the conversion.
Bracket filling is usually a multi-year exercise rather than a single decision. Converting a $400,000 IRA in one year would push a married couple deep into the 32% band; spreading it across ten gap years at 22% is a materially different outcome for the same balance. Model the remaining balance and future required distributions with the RMD calculator so you can see what is left to convert each year.
The same rate comparison sits underneath the annual contribution decision, which is the subject of the traditional versus Roth calculator. If you conclude that Roth is right for your contributions, it is usually the same reasoning that makes conversions attractive. Project the after-tax outcome with the Roth IRA growth calculator, and remember that a Roth balance is worth more per dollar than a traditional balance of the same size precisely because the tax has already been paid.
This calculator is an estimate, not tax advice. It applies one flat state rate, one filing status schedule, and no credits, alternative minimum tax, or threshold effects. Before executing a conversion of any size, run the numbers through your actual return or take advice from a tax professional.