How to Convert a Traditional IRA to a Roth IRA

Yes, you can convert a Traditional IRA to a Roth IRA, but you will owe income tax on the amount you convert

A Roth conversion moves money from your Traditional IRA into a Roth IRA. The IRS allows this at any time, regardless of your age or income. The catch: you pay ordinary income tax on the converted amount in the year you do it, as if you had withdrawn the money and received it as taxable income.

The reason people do this despite the tax bill is that the money then grows tax-free in the Roth, and you never pay tax on withdrawals in retirement. If you convert early and have decades for the account to grow, the tax you pay upfront can be far smaller than the tax you would have paid later on a much larger balance.

Conversions are most useful when your income is temporarily low (a year you took unpaid leave, retired early, or had a business loss), when you expect tax rates to rise, or when you want to move money into an account with no required withdrawals at age 73.

Key Takeaways

• You can convert any amount from a Traditional IRA to a Roth IRA at any age, but the converted amount is taxed as ordinary income in that tax year.
• The conversion itself is not a withdrawal—you do not receive the money—so it does not trigger the 10% early withdrawal penalty even if you are under 59½.
• If you have multiple Traditional IRAs, SEP IRAs, or SIMPLE IRAs, the IRS treats them as one account for tax purposes when you convert, which can create an unexpected tax bill.
• You have until October 15 of the year after the conversion to undo it by filing an amended tax return, though this option has become more limited in recent years.
• Roth conversions can trigger higher Medicare premiums and reduce the tax benefit of other deductions, so the math depends on your full tax picture that year.

How the conversion process works

A conversion happens in one of two ways. The simplest is a direct trustee-to-trustee transfer: you contact your Traditional IRA custodian (your bank, brokerage, or IRA provider) and ask them to move funds directly to your Roth IRA custodian. No check comes to you, and the money never touches your hands. This is the cleanest route and leaves no room for error.

The second method is a rollover. Your Traditional IRA custodian sends you a check for the amount you want to convert. You then deposit it into your Roth IRA within 60 days. This method works, but it is riskier: if you miss the 60-day window, the IRS treats it as a withdrawal, not a conversion, and you may owe the 10% early withdrawal penalty on top of income tax.

Either way, your IRA custodian will report the conversion to the IRS on Form 8606. You then report it on your tax return for that year. The converted amount is added to your other income and taxed at your marginal rate.

The tax bill you will owe

When you convert, you pay income tax on the full amount converted, calculated as if it were ordinary income. If you convert $50,000 and you are in the 24% federal tax bracket, you owe $12,000 in federal tax (plus any state income tax, which varies by state). That tax is due when you file your return for the year of the conversion.

The tax is not withheld automatically. You can ask your IRA custodian to withhold it from the conversion itself, or you can pay it separately when you file. Many people pay it from outside the IRA so that the full converted amount stays in the Roth and can grow tax-free.

If you have a large balance in a Traditional IRA, converting all of it in one year can push you into a higher tax bracket. Some people spread conversions over several years to keep each year's tax bill manageable. There is no limit on how many conversions you can do or how much you can convert per year.

The pro-rata rule: why having multiple IRAs matters

If you own more than one Traditional IRA, SEP IRA, or SIMPLE IRA, the IRS applies the pro-rata rule when you convert. This rule treats all your IRAs as a single account for tax purposes, even if they are at different institutions.

Here is how it works in practice: suppose you have a Traditional IRA with $100,000 (all pre-tax contributions) and a SEP IRA with $400,000 (also pre-tax). You want to convert $100,000 to a Roth. The IRS says you are converting 20% of your total IRA balance ($100,000 out of $500,000). So 20% of the conversion is taxable, and 80% is considered a return of your own contributions—except that is not how it actually works. Instead, you owe tax on 80% of the $100,000 you converted, or $80,000.

This rule catches many people off guard. If you have a large pre-tax IRA balance and a small Roth conversion IRA with after-tax contributions, converting the after-tax money does not let you avoid tax on the conversion. The pro-rata rule applies regardless. The only way around it is to move the pre-tax money out of the IRA system entirely (usually by rolling it into a 401(k) plan at your employer, if your plan allows it).

When conversions make the most sense

A conversion is most valuable when your tax bracket is low. This happens in years when you have little or no income—a gap between jobs, early retirement before you start taking Social Security, a year your business had a loss, or a year you took unpaid leave. Converting in a low-income year means you pay a lower rate on the converted amount.

Conversions also make sense if you expect tax rates to be higher in the future. If you believe federal income tax rates will rise, paying tax now at today's rates to lock in tax-free growth later can be a good trade. This is a longer-term bet, but it is a legitimate reason to convert.

A third scenario is when you want to reduce your required minimum distributions (RMDs) in retirement. Traditional IRAs require you to start taking distributions at age 73. Roth IRAs have no RMD requirement during your lifetime. If you convert money to a Roth while you are still working or in a low-income year, you reduce the balance subject to RMDs later, which can lower your tax bill and preserve more of your assets.

The tax consequences beyond income tax

A large conversion can trigger other tax costs you may not expect. If you are on Medicare, a conversion can increase your income for the year, which may push you into a higher Medicare premium bracket. Medicare premiums are based on your modified adjusted gross income (MAGI) from two years prior, so a 2024 conversion affects your 2026 premiums.

A conversion can also reduce the tax benefit of other deductions. If you are claiming the standard deduction, a conversion that pushes you into a higher bracket means some of that deduction is wasted. If you are subject to the net investment income tax (a 3.8% tax on certain investment income for high earners), a conversion can trigger or increase that tax.

These effects are why it pays to run the numbers with your full tax picture for the year before you convert. A conversion that looks good in isolation can be expensive when you account for these secondary effects.

Undoing a conversion: recharacterization rules

Until recently, you could undo a conversion by filing a recharacterization—essentially asking the IRS to treat the conversion as if it never happened. You had until October 15 of the year after the conversion to do this. If the market dropped after you converted, you could recharacterize, avoid the tax bill, and reconvert later at a lower value.

The rules changed in 2018. Now you can no longer recharacterize a conversion. Once you convert, the conversion is permanent for tax purposes. You can still move the money back to a Traditional IRA if you want, but the IRS will not undo the tax consequences. This makes it even more important to think through the tax impact before you convert.

Frequently Asked Questions

Do I have to convert my entire Traditional IRA at once?

No. You can convert any amount, from a small portion to the entire balance. You can also do multiple conversions in the same year or spread them across different years. Each conversion is reported separately on your tax return.

What happens if I convert and then need the money before age 59½?

You can withdraw the converted amount from the Roth without penalty, but only after the money has been in the Roth for five years. Earnings on the conversion are subject to the 10% early withdrawal penalty if you withdraw them before 59½. The five-year rule is per Roth account, not per conversion.

Can I convert if my income is too high for a Roth IRA contribution?

Yes. There is no income limit on conversions, even though there is an income limit on direct Roth contributions. This is why high-income earners often use the "backdoor Roth" strategy: they contribute to a Traditional IRA and immediately convert it to a Roth, bypassing the income limit.

Will a conversion affect my Social Security benefits?

A conversion increases your income for the year, which could push you into a tax bracket where some of your Social Security becomes taxable. The effect depends on your other income and when you claim. If you are already receiving Social Security, run the numbers before converting.

What if I have both a 401(k) and a Traditional IRA?

The pro-rata rule applies only to IRAs, not to 401(k)s. If you have a 401(k) with pre-tax money and a Traditional IRA with pre-tax money, you can roll the 401(k) into the Traditional IRA first, then convert the IRA. This does not change the pro-rata calculation, but it can help you manage which money you convert.