A $26,500 Roth conversion costs $3,180 in 2026. Here is the arithmetic
Rev. Proc. 2025-32 fixes the 2026 brackets. Filling the 12% band, the pro-rata rule on Form 8606 and the two five-year clocks, worked line by line.
- What happened
- The IRS set the 2026 tax brackets and standard deduction in Revenue Procedure 2025-32 (IR-2025-103, October 9, 2025). For a single filer the 12% rate runs from $12,400 to $50,400 of taxable income; the standard deduction is $16,100 single and $32,200 joint.
- Why
- A conversion from a traditional IRA to a Roth IRA is taxed as ordinary income in the year it is done. The brackets therefore set the price of each dollar converted, and the price steps up at fixed, published thresholds.
- The numbers that matter
- $50,400Top of the 12% bracket, single, 2026$100,800Top of the 12% bracket, joint, 2026$3,180Federal tax on filling the 12% band from $23,900 of taxable income0.100Form 8606 ratio when basis is $10,000 of a $100,000 IRA
- Why it matters
- The same $40,000 conversion can cost 12 cents or 22 cents per dollar depending on what else is on the return, and part of it can be tax-free if the IRA holds after-tax money. The forms decide, not the brokerage.
- What happens nextas we saw it on 13 Oct 2026
- The 2026 brackets apply to returns filed in 2027. The IRS publishes the 2027 inflation adjustments in a further revenue procedure, in past years in October or November; Pub 590-A and 590-B for 2026 returns follow in early 2027.
The first $26,500 is taxed at 12%; the step to 22% arrives inside the third slice.
| $0–10,000 | 1200 |
|---|---|
| $10,000–20,000 | 1200 |
| $20,000–30,000 | 1550 |
| $30,000–40,000 | 2200 |
| $40,000–50,000 | 2200 |
A single filer with $40,000 of pension and interest income in 2026 can move $26,500 from a traditional IRA to a Roth IRA and owe the federal government $3,180 on it. Move $40,000 instead and the bill is $6,150. The first figure is 12.0% of the amount converted; the second is 15.4%. Nothing about the account changed between the two. What changed is where the last dollar landed on a table the Internal Revenue Service published on October 9, 2025.
That table is the whole subject of this piece. A Roth conversion is one of the few tax events a household chooses the size and timing of, so the arithmetic is worth doing in full, with the thresholds, the form that computes the taxable share, and the two separate five-year clocks that govern what comes out afterwards. None of what follows is advice. It is the published mechanism, with the inputs shown so the reader can redo it.
The 2026 table
The IRS release IR-2025-103 of October 9, 2025, and the revenue procedure it announces give the 2026 figures. For a single filer the standard deduction is $16,100; for a married couple filing jointly it is $32,200. The 12% rate applies to taxable income over $12,400 (single) or $24,800 (joint); the 22% rate starts above $50,400 and $100,800; the 24% rate above $105,700 and $211,400. The revenue procedure also prints the cumulative tax at each edge: a single filer with exactly $50,400 of taxable income owes $5,800; a joint return with exactly $100,800 owes $11,600.
| Rate | Single: taxable income over | Tax at the top of the band (single) | Joint: taxable income over | Tax at the top of the band (joint) |
|---|---|---|---|---|
| 10% | $0 | $1,240 at $12,400 | $0 | $2,480 at $24,800 |
| 12% | $12,400 | $5,800 at $50,400 | $24,800 | $11,600 at $100,800 |
| 22% | $50,400 | $17,966 at $105,700 | $100,800 | $35,932 at $211,400 |
| 24% | $105,700 | $41,024 at $201,775 | $211,400 | $82,048 at $403,550 |
| 32% | $201,775 | $58,448 at $256,225 | $403,550 | $116,896 at $512,450 |
| 35% | $256,225 | $192,979.25 at $640,600 | $512,450 | $206,583.50 at $768,700 |
| 37% | $640,600 | — | $768,700 | — |
Two things about this table matter for a conversion. The thresholds are in taxable income, which is income after the standard deduction (or itemized deductions) has been subtracted. And the rates are marginal: crossing $50,400 does not re-price the dollars below it, only the dollars above. The 2026 capital gains thresholds, which sit on a different schedule, are covered in the site's capital gains piece.
Filling the 12% bracket: the worked example
The IRS's IRA rollover FAQ states that “a conversion to a Roth IRA results in taxation of any untaxed amounts in the traditional IRA” and that “the conversion is reported on Form 8606, Nondeductible IRAs.” Pub 590-B adds that conversion distributions “are includible in your gross income.” The converted amount is ordinary income; it is not a capital gain.
Other income $40,000 minus the 2026 standard deduction of $16,100 gives taxable income of $23,900. The 12% band ends at $50,400, so the room left in it is 50,400 − 23,900 = $26,500. Converting exactly that amount adds 26,500 × 0.12 = $3,180 of federal income tax. Cross-check against the revenue procedure: tax on $23,900 is 1,240 + 0.12 × (23,900 − 12,400) = $2,620; tax on $50,400 is $5,800 as printed; the difference is $3,180.
The first $26,500 is taxed at 12% ($3,180). The remaining 40,000 − 26,500 = $13,500 falls in the 22% band: 13,500 × 0.22 = $2,970. Total $6,150. As a share of the conversion, 6,150 ÷ 40,000 = 15.4%. The chart above cuts the same conversion into $10,000 slices: $1,200, $1,200, $1,550, $2,200, $2,200. The third slice is where 6,500 dollars at 12% ($780) meet 3,500 dollars at 22% ($770).
Other income $60,000 minus the joint standard deduction of $32,200 gives taxable income of $27,800. The joint 12% band ends at $100,800, leaving 100,800 − 27,800 = $73,000. Converting that amount costs 73,000 × 0.12 = $8,760. The same couple converting $100,000 would pay $8,760 on the first $73,000 and 27,000 × 0.22 = $5,940 on the rest, $14,700 in all, or 14.7%.
The example assumes the conversion is the only variable. In practice other income moves too: Social Security benefits become taxable in part as other income rises, and state income tax sits on top of every figure here. The arithmetic is the same shape; only the inputs change.
If the $3,180 is withheld from the $26,500 rather than paid from a bank account, only $23,320 reaches the Roth IRA. The withheld $3,180 is a distribution that was not converted. For someone under 59½, Tax Topic 557 says the 10% additional tax “applies to the part of the distribution that you have to include in gross income” unless an exception applies, so that $3,180 would also carry $318 of additional tax. The IRS rollover page notes that IRA distributions paid to the account holder carry 10% withholding unless the holder elects out, and that a trustee-to-trustee transfer avoids withholding.
The pro-rata rule: Form 8606 decides how much is taxable
The FAQ's phrase “any untaxed amounts” is doing work. If every dollar in the traditional IRA was deducted when it went in, or is growth, the whole conversion is taxable. If some contributions were made without a deduction, the account has basis, and the taxable share is computed, not chosen. The computation is Part I of Form 8606.
The 2025 form's line 6 asks for “the value of all your traditional IRAs as of December 31, 2025, plus any outstanding rollovers.” The instructions state that “traditional IRAs generally include traditional SEP IRAs and traditional SIMPLE IRAs, unless otherwise stated.” Line 8 is “the net amount you converted from traditional IRAs to Roth IRAs in 2025”; line 9 adds lines 6, 7 and 8; line 10 is “Divide line 5 by line 9”, entered as a decimal to at least three places. Line 11 multiplies the conversion by that ratio to give the nontaxable portion; Part II line 18, “Taxable amount. Subtract line 17 from line 16”, goes to Form 1040 line 4b.
Suppose total basis (line 5) is $10,000 and the IRAs are worth $100,000 before a $20,000 conversion. Line 6, the value at December 31, is $80,000; line 7 (other distributions) is $0; line 8 is $20,000; line 9 is 80,000 + 0 + 20,000 = $100,000. Line 10 is 10,000 ÷ 100,000 = 0.100. Line 11 is 20,000 × 0.100 = $2,000 nontaxable; line 18 is 20,000 − 2,000 = $18,000 taxable. Converting only $10,000 and calling it “the after-tax money” does not work: line 9 is still $100,000, the ratio is still 0.100, and $9,000 of the $10,000 is taxable. The remaining basis, $9,000, carries forward on line 14.
Two details from the instructions are easy to miss. The ratio uses the year-end value of all the accounts, so a market move between the conversion date and December 31 changes the taxable share after the fact. And the form adds the conversion back on line 9, so the denominator is the value before the money left, not after.
The five-year clocks, and the rule that orders them
Pub 590-B for 2025 returns lists, under its Roth chapter, both a “5-year period” for qualified distributions and a separate heading, “Distributions of conversion and certain rollover contributions within 5-year period”, under the additional tax on early distributions. The instructions for Form 5329, which is where that additional tax is computed, spell both out.
The Form 5329 instructions define a qualified distribution as one “made after the 5-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for your benefit” and that is also made on or after age 59½, because of disability, to a beneficiary after death, or for a first home up to $10,000. The clock starts with the first tax year of any contribution to any Roth IRA of the owner's, not with each conversion. Until both conditions hold, earnings are not a qualified distribution.
For a 2025 early distribution, the same instructions say: “If you converted or rolled over an amount to your Roth IRAs in 2021 through 2025 … the recapture amount you must include on line 1 is the amount, if any, of the early distribution allocated to the taxable portion of your 2021 through 2025 conversions or rollovers.” Line 1 of Form 5329 is where the 10% additional tax is figured. The window is the conversion year plus the four following tax years, and it runs separately for each conversion.
“Generally, an early distribution is allocated to your Roth IRA contributions first, then to your conversions and rollovers on a first-in, first-out basis.” Within each conversion, the distribution goes “first … to the portion that was subject to tax in the year of the conversion or rollover, and then to the portion that wasn't subject to tax.” Regular contributions therefore come out before any conversion, and the oldest conversion before the newest.
- A $26,500 conversion made in 2026 that is fully taxable is subject to recapture if withdrawn before 2031 by someone under 59½ with no exception, at 10% of the amount withdrawn from it.
- The $2,000 nontaxable portion in the Form 8606 example above is not recaptured; recapture applies only to the portion that was taxed at conversion.
- Someone who first contributed to any Roth IRA in 2019 satisfies clock one from the 2024 tax year; clock two still applies to each later conversion on its own schedule.
What cannot be undone, and what is not limited
The IRS recharacterization FAQ: “Effective January 1, 2018, pursuant to the Tax Cuts and Jobs Act (Pub. L. No. 115-97), a conversion from a traditional IRA, SEP or SIMPLE to a Roth IRA cannot be recharacterized.” The same answer prohibits recharacterizing amounts rolled to a Roth IRA from plans such as a 401(k). The year-end value drop that raises the taxable share on Form 8606 therefore cannot be reversed by undoing the conversion.
The IRS rollover page lists “rollovers from traditional IRAs to Roth IRAs (conversions)” among the transactions the one-per-year IRA rollover limit does not apply to. A household can convert in several pieces across a year, which is the mechanism behind converting up to a bracket edge once the year's other income is known.
The income phase-outs that limit direct Roth contributions ($153,000 to $168,000 single and $242,000 to $252,000 joint for 2026, per Pub 590-A) apply to contributions, not conversions. Pub 590-A also gives the 2026 contribution limit as $7,500, or $8,600 for those 50 or older; the broader 2026 limits are in the retirement limits piece.
What it means for your money
The price of a conversion is set by three published numbers: the top of the bracket you are in, the deduction that gets you there, and the Form 8606 ratio. A household can find all three before moving a dollar. The room in the 12% band is the bracket top minus taxable income without the conversion; the Form 8606 ratio is total basis divided by the year-end value of every traditional IRA plus the amount converted.
The second thing the arithmetic shows is that a conversion's cost is not the headline rate. In the single example, $40,000 converted at “the 22% bracket” cost 15.4% because most of it never reached that bracket. Equally, a conversion that looks cheap at 12% can cost more elsewhere on the return: Social Security taxation, the net investment income tax thresholds and state tax all key off the same income figure. Medicare's income-related premium surcharges are also set from a prior-year return, so conversion income surfaces there too; the brackets are the subject of a separate piece on this site.
Third, money that leaves a Roth within five years of a taxable conversion is treated differently from money that stays, and the forms track each conversion's own window. Anyone converting in 2026 who may need the cash before 2031 is converting on different terms from someone who does not. The site's pieces on required minimum distributions and compound growth cover the other side of the ledger: what the Roth balance does once the tax has been paid.
Sources
- IR-2025-103: IRS releases tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill (October 9, 2025)Internal Revenue Service · Oct 12, 2026 · Primary source
- Revenue Procedure 2025-32 (2026 inflation adjustments: section 4.01 rate tables, section 4.14 standard deduction)Internal Revenue Service · Oct 12, 2026 · Primary source
- Publication 590-B (2025), Distributions from Individual Retirement Arrangements (IRAs)Internal Revenue Service · Oct 12, 2026 · Primary source
- Publication 590-A (2025), Contributions to Individual Retirement Arrangements (IRAs)Internal Revenue Service · Oct 12, 2026 · Primary source
- Form 8606 (2025), Nondeductible IRAsInternal Revenue Service · Oct 12, 2026 · Primary source
- Instructions for Form 8606 (2025)Internal Revenue Service · Oct 12, 2026 · Primary source
- Instructions for Form 5329 (2025), Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored AccountsInternal Revenue Service · Oct 12, 2026 · Primary source
- Retirement plans FAQs regarding IRAs, rollovers and Roth conversionsInternal Revenue Service · Oct 12, 2026 · Primary source
- IRA FAQs: Recharacterization of IRA contributionsInternal Revenue Service · Oct 12, 2026 · Primary source
- Rollovers of retirement plan and IRA distributionsInternal Revenue Service · Oct 12, 2026 · Primary source
- Topic No. 557, Additional tax on early distributions from traditional and Roth IRAsInternal Revenue Service · Oct 12, 2026 · Primary source
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