Next-year Roth conversion?

IRS & State Tax Calculator | 2005 -- 2024 is useful for modeling out your target conversion... or TurboTax's What-If Worksheet if you use TurboTax. I get a conversion of $195,810 with the data that you provided.

$201k is the top of the 22% tax bracket, not the 24% tax bracket but since you cited the $201k I assumed that you meant to the top of the 22% bracket. The top of the 24% tax bracket is $384k of taxable income.

You do not need to liquidate. You can transfer positions and the conversion amount is based on the fair market value at the time of the transfer. Multiple conversions in a year are ok. I often do 90% of my estimated conversion early and then top it up later when I have a better idea of our tax picture... often the last couple days of December.

You can pay the tax with an estimated tax payment at the same time that you do the conversion OR an additional IRA withdrawal for the tax with 100% tax withholding and then transfer the amount withdrawn from taxable account to the tIRA to replace it (as long as you haven't had a rollover contribution in the last 12 months).

I wouldn't worry too much about trying to get right at the very top of a tax bracket. If you go over by a little bit, only that little bit is taxed at that higher rate.

Where I would worry is cliffs like IRMAA tiers and the ACA subsidy cliff if that should return. Going over a little can cost you many times the amount of the overage.

I think making these estimates is easier for those of us who do our own taxes. If you just turn over a pile of 1099s and other forms to your tax preparer, you may not really understand how all the pieces work together.

We use the IRMAA threshold predictions for 2026 found at 2024 2025 2026 Medicare Part B IRMAA Premium MAGI Brackets instead of top of 22% MFJ income tax bracket.

Finance Dave said:

1) How much theoretically could I convert to get close to the $201k 24% bracket? Assuming my math above of $40k income is correct, I'm thinking I could take about $190k as a conversion and stay in the 22% bracket, does that seem right? $40k + $190k = $230k - $30k standard deduction = $200k AGI...which keeps us barely in the 22% bracket...this is really my key question...do I have the math right? I probably would do more like $160k initially, then re-assess and do more later in the year if it works out.
2) I do have the cash in an "after tax" account that I can pay the taxes, but what mechanism should I use to pay them? I have my accounts at FIDO...do I pay it through their website somehow? Or do I pay at the IRS website?
3) I'm thinking I do the conversion in the early fall just to make sure I have plenty of time, then I COULD do an additional one later in the year...are multiple conversions within one year permitted?
4) If I have my TIRA at FIDO in investments, do I have to liquidate them to do the conversion, or can I convert them "in kind"? We have a combination of CDs, equity ETFs, bond funds, and a decent cash position in FZDXX...so I have options but wouldn't have enough cash to convert all $190k.

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1) The Roth Conversion with Social Security and Medicare IRMAA article may help you. Between the "survivor files single" and "bracket rates might increase" possibilities, the difference between a 22% and 24% marginal rate isn't very significant.

2) Would increased withholding from the penson for the rest of the year (up to ~all of it if needed) suffice? If so that is probably the easiest way.

3) Yes.

4) Ask FIDO.

Thank you…I’ll play with this

Good point!

Great info, thank you!

RetiredAndLovingIt said:

You can play around with the numbers with this free 2024 state and tax calculator. I use it to figure out my final Roth Conversion each year.

IRS & State Tax Calculator | 2005 -- 2024

Easily and accurately calculate IRS & State personal income taxes online.

www.irscalculators.com

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I use the same one and it has proven very accurate for Federal. Don't count on the State being correct though unless your state has a very vanilla tax plan which I doubt any states do. Last year it told me I owed several thousand bucks to state although I pay 0$ to state due to pension/SS/Retirement fund exemptions with age requirements. Just a heads up on that.

5Miler said:

I use the same one and it has proven very accurate for Federal. Don't count on the State being correct though unless your state has a very vanilla tax plan which I doubt any states do. Last year it told me I owed several thousand bucks to state although I pay 0$ to state due to pension/SS/Retirement fund exemptions with age requirements. Just a heads up on that.

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That is consistent with my experience... good for federal but use caution for state.

5Miler said:

I use the same one and it has proven very accurate for Federal. Don't count on the State being correct though unless your state has a very vanilla tax plan which I doubt any states do. Last year it told me I owed several thousand bucks to state although I pay 0$ to state due to pension/SS/Retirement fund exemptions with age requirements. Just a heads up on thaSame f

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pb4uski said:

That is consistent with my experience... good for federal but use caution for state.

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I agree as well. In my case it does not give me the California over 65 additional exemption.

5Miler said:

I use the same one and it has proven very accurate for Federal. Don't count on the State being correct though unless your state has a very vanilla tax plan which I doubt any states do. Last year it told me I owed several thousand bucks to state although I pay 0$ to state due to pension/SS/Retirement fund exemptions with age requirements. Just a heads up on that.

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RetiredAndLovingIt said:

I agree as well. In my case it does not give me the California over 65 additional exemption.

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The case study spreadsheet in Excel also doesn't have the same fidelity for all state taxes that it does for federal, but it does seem to cover the GA and CA issues noted above.

Thanks again for all the replies. I have come to the following updated conclusion:

If I use the website above with the estimated IRMAA for 2026 and assuming the conservative 0% inflation, that shows an income limit for MFJ of $214,000. Yes, as one person pointed out...I mis-spoke a bit and meant "the BOTTOM" of the 24% bracket when I mentioned $201k. That being said, there is the issue of IRMAA not including the standard deduction (being based on MAGI instead of AGI), so I need to adjust my numbers by $29,200 to avoid it. I also logged into FIDO and did a YTD total of our dividends and interest in our after-tax account. I have quite a bit of muni interest, and I know this is NOT excluded from MAGI even though it IS excluded from federal taxable income...so I've made sure to add that as well and doubled the YTD number to get me close to a year-end total. I also made an adjustment to my self-employed income by estimating self-employment taxes I will be paying. My revised numbers look like this now...

$15k pension
$12k self-employment net income
$18k interest
$3k dividends
$4k muni bond interest
Total $52k

I was off quite a bit on my original interest estimate, as many of my older, low-yielding CDs matured and were replaced with much higher-yielding ones!

A Roth conversion of $162k would then seem to be the upper limit. This would keep us away from IRMAA and well below the 24% bracket. I'll probably do about $145-$150k in September/October, and then look in December to see if I should do more.

Now time to head over to the BTD thread, as I have some news to report!

Finance Dave said:

...IRMAA not including the standard deduction (being based on MAGI instead of AGI), so I need to adjust my numbers by $29,200 to avoid it.

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Neither MAGI nor AGI are affected by the standard deduction.

Surprising how many don't realize that there are different MAGIs for different purposes. It's almost as if the IRS wasn't interested in making things simple for us.

braumeister said:

Surprising how many don't realize that there are different MAGIs for different purposes. It's almost as if the IRS wasn't interested in making things simple for us.

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Congress writes (and the President mostly signs off on) the laws that are inconsistent. The IRS is the agency which manages and administrates those laws but has no power to make them consistent or simple.

SevenUp said:

Neither MAGI nor AGI are affected by the standard deduction.

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You’re right…I keep miscommunicating…I meant to say the tax brackets are based on taxable income and IRMAA limits are based on MAGI. Thanks for correcting.