The passage of the One Big Beautiful Bill (OBBBA) has introduced meaningful changes to the tax and planning landscape. In this post, we explore how those changes affect Roth conversions. For a broader discussion of the new law’s key features, see our post Tax Highlights of the “One Big Beautiful Bill Act”. And for a refresher on how the standard vs. itemized deduction landscape has shifted, see Jon Sevenker’s post Standard vs Itemized Deductions Under New Tax Law.
While the urgency to convert before the end of this year has lessened under the new law, the decision of if and when to convert still demands careful strategic thinking.
Less Pressure to Act — But Timing Still Matters
A key feature of the OBBBA was the extension of the tax brackets that have been in place since 2018. In the absence of the new law, tax rates were set to sunset at the end of 2025 and revert to the (higher) pre-2018 levels. However, under the new law Congress has made them “permanent.” Still, that doesn’t mean every year is equally good for conversion. In years where your income dips or market valuations fall, the timing could be more advantageous.
While the extension of the tax brackets removes some of the urgency it places greater emphasis on your long-term outlook for taxes and income.
Why Roth Conversions Can Still Be Worth Considering
A Roth conversion remains a powerful tool, but its value depends heavily on your personal tax and income trajectory. Some of the key factors to weigh:
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- Expected future tax rate – Will your effective rate likely be higher later?
- Required Minimum Distributions (RMDs) and tax drag – Could large required minimum distributions later in life push you into higher tax brackets or trigger additional taxes such as the 3.8% Net Investment Income Tax?
- IRMAA and Medicare surcharges – Higher income in certain years can raise your Medicare Part B and D premiums significantly.
- Survivor dynamics – After one spouse passes, the surviving spouse may file as a single taxpayer, often in a higher bracket.
- Inherited IRA tax rates – If your children inherit a traditional IRA during their peak earning years, their tax rates may exceed yours now.
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These considerations require forward-looking modeling, not just a snapshot view of your current year.
New Complexities Introduced by OBBBA
The new law adds several important caveats to conversion decisions. Here are a few of the biggest ones:
SALT Deductibility & Conversion Drag
The state and local tax (SALT) deduction limit has been raised to $40,000 starting in 2025, but it phases down for Modified Adjusted Gross Incomes (MAGI) above $500,000 and is reduced back to $10,000 by $600,000 of MAGI. If a Roth conversion pushes your income into that range, you could lose some or all of this benefit.
Conversely, if your state tax payments fall below $40,000, you might consider prepaying property taxes or fourth-quarter estimates to “fill up” that deduction room before conversion.
Charitable Giving Timing
Beginning in 2026, the first 0.5% of charitable deductions will be disallowed—meaning you’ll need to exceed that floor to deduct. This makes 2025 a particularly good year to pull charitable gifts forward or fund a donor-advised fund (DAF), especially if you’re already considering a Roth conversion.
Senior Bonus Deduction
OBBBA introduced a new $6,000 “senior deduction” per person age 65 or older, which can modestly offset Roth conversion income. However, this benefit phases out between $75,000 and $175,000 for single filers and $150,000 to $250,000 for joint filers. Beyond those thresholds, the deduction disappears entirely.
Bonus Depreciation for Business Owners
If you own a pass-through business, the return of 100% bonus depreciation for most qualified property acquired (and generally placed in service) after January 19, 2025 can provide an offsetting deduction that helps neutralize income from a Roth conversion.
How to Think About Conversions in This New Era
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- Run tax projections — Model future RMDs, IRMAA brackets, survivor filing status, and SALT phaseouts.
- Stage conversions — Spread conversions over several years to avoid “tax cliffs.”
- Integrate charitable planning — Use 2025 to accelerate gifts before the new 0.5% floor applies.
- Coordinate with your CPA — Align conversion timing with your full tax picture.
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At Pittenger & Anderson, we’re ready to help you model whether a Roth conversion makes sense in the post-OBBBA world. The law may have removed some of the urgency to act, but it has also added a few new wrinkles. As always, customizing a strategy to your unique situation remains important.
Reach out if you’d like help running projections or coordinating with your accountant or CPA.
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