By Chuck Roulet, Estate and Elder Law Attorney | Licensed in Florida and Minnesota
There has been a lot of conversation in recent years about converting a traditional IRA to a Roth before tax rates increased. In July 2025, Congress passed and President Trump signed the One Big Beautiful Bill Act, which permanently extended the individual income tax rates from the 2017 Tax Cuts and Jobs Act. The sunset deadline passed. The rates stayed.
For many families, that news was met with relief — and then a question: does that mean the Roth conversion opportunity is gone? The answer is no. The case for Roth conversions did not disappear when rates were made permanent. In some ways, it became clearer.
What the One Big Beautiful Bill Act Did
The Tax Cuts and Jobs Act of 2017 reduced individual income tax rates across most brackets, with a built-in expiration date of December 31, 2025. For years, estate and tax planners pointed to that sunset as a compelling reason to accelerate Roth conversions before rates potentially increased.
The One Big Beautiful Bill Act, signed into law on July 4, 2025, permanently extended those reduced rates. The current individual income tax brackets — 10%, 12%, 22%, 24%, 32%, 35%, and 37% — are now the permanent rates, subject only to future changes by a future Congress. The pre-2018 rate structure that would have applied in a sunset scenario — where the 22% bracket became 25%, the 24% became 28%, and so on — is no longer the relevant comparison.
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What This Means for Tax Planning |
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Permanent rates are actually better news for long-term Roth conversion planning than a temporary window would have been. A deadline creates urgency but also compressed decisions. Permanent rates allow for a deliberate, multi-year systematic conversion strategy — converting at your optimal bracket each year, indefinitely, without a forcing function. |
Why Roth Conversions Still Make Strong Sense
The fundamental argument for Roth conversions was never solely about avoiding a rate increase. The deeper argument — which is unchanged — is this: every dollar in a traditional IRA is a deferred tax bill. The question is not whether that tax will be paid, but by whom and at what rate.
When you convert, you pay the tax at your current rate. When your heirs inherit a traditional IRA, they pay the tax at their rate — and under the SECURE Act's 10-year rule, that happens within a decade, typically during their peak earning years. If your current rate is lower than your heirs' expected rate during their distribution window, converting at your rate produces a better outcome for the family.
That rate differential is where the planning value lies. A parent in the 22% bracket converting to Roth is effectively prepaying a tax that their children might otherwise pay at 32% or higher. The difference on a $500,000 IRA is $50,000 or more in total family tax cost — permanently saved.
What a Roth Conversion Does for Your Heirs Under the SECURE Act
When your heirs inherit a Roth IRA, they still face the SECURE Act's 10-year withdrawal requirement. But every distribution they take from an inherited Roth IRA is completely income-tax-free — regardless of their bracket, regardless of when within the 10-year window they withdraw.
The contrast with a traditional inherited IRA is significant. A $500,000 traditional IRA that your adult child inherits may cost them $125,000 to $185,000 in income tax over the 10-year distribution window, depending on their bracket and other income. A $500,000 Roth IRA inherited by the same child costs them nothing. That is the value of the conversion — paid once, at your rate, eliminates a much larger tax bill at their rate.
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The Conversion Math in Plain Terms |
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Convert $100,000 at your 22% rate: you pay $22,000 now. Your heir inherits it tax-free. Without conversion, your heir withdraws $100,000 at their 32% rate: they pay $32,000. The $10,000 difference on $100,000 converted is a permanent family tax saving. On a $1,000,000 IRA converted systematically at the right rate, the family savings can exceed $100,000. |
The Systematic Partial Conversion Strategy
The most effective approach for most families is not a single large conversion but a disciplined series of annual partial conversions — converting enough each year to fill your current tax bracket without crossing into the next one.
Here is how it works. If your income from other sources leaves $35,000 of room in your 22% bracket before you would cross into 24%, you convert $35,000 of traditional IRA funds this year. You repeat the analysis each year, targeting the bracket-filling amount that maximizes the long-term benefit without creating an unnecessarily large current-year tax bill. With permanent rates in place, this can now be modeled as a multi-year plan rather than a race against a deadline.
This requires working with your CPA to model your expected income each year and determine the optimal conversion amount. The planning is not complicated, but it does require specific numbers — your projected income, your expected bracket each year, and the current balance of your traditional IRA.
Pairing a Roth Conversion With a Charitable Deduction
One of the most effective ways to reduce the net tax cost of a Roth conversion is to pair it with a significant charitable contribution in the same year. A large charitable deduction offsets a portion of the conversion income — in some cases significantly reducing or nearly eliminating the additional tax in a given year.
If you have planned charitable contributions — a donor-advised fund contribution, a gift to an institution, or a contribution to a Charitable Remainder Trust — the year of a Roth conversion is an optimal time to make it. The deduction absorbs the conversion income. The conversion builds a tax-free inheritance. Both objectives are achieved in the same tax year at lower net cost.
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The Conversation to Have With Your CPA |
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Now that rates are permanent, the Roth conversion analysis becomes a multi-year modeling exercise rather than a single-year decision. The question to bring to your CPA is: given our current income, our expected bracket each year, and the size of our traditional IRA, what is the optimal annual conversion amount to systematically transfer this IRA to a Roth at our rate before our heirs withdraw it at theirs? That question, coordinated with your estate planning attorney, is how the strategy gets built. |
For the complete treatment of Roth conversions in the context of IRA estate planning — including the interaction with trust structures and charitable strategies — read our full guide by clicking here.
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Chuck Roulet is an estate and elder law planning attorney at Roulet Law Firm, P.A., with offices in Minnetonka, Minnesota and Venice, Florida. He is licensed in both states and has nearly 30 years of experience helping families protect their homes, life savings, and legacies.
This page is for informational purposes only and does not constitute legal advice. Please consult a licensed attorney about your specific situation.
