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If you were planning to undertake a Roth IRA conversion this year, the newly introduced One Big Beautiful Bill (OBBB) won’t necessarily impact you directly.
However, the bill has an indirect impact that could make a Roth IRA conversion more or less attractive, depending on your age and income.
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Here’s a closer look at how this sweeping new tax bill could change your approach to a Roth IRA conversion this year.
New senior deduction
Perhaps the most noteworthy aspect of the OBBB is the new deduction for seniors across America. Taxpayers who are 65 or older can now claim an extra $6,000 as a tax deduction above their standard deduction and additional standard deduction, effectively reducing their tax liability.
This senior deduction is per filer, so a couple filing together could get up to $12,000 in additional deductions as a result of the new tax act.
In theory, the deduction could save you money and provide you with greater tax-free room during a Roth IRA conversion.
That’s because any cash converted from your traditional IRA into a Roth IRA is regarded as regular income, meaning you will pay taxes on it during the process.
Effectively, the senior deduction could make a Roth IRA conversion more attractive. However, there are some limitations on the deduction that could make it less attractive depending on your income and time horizons.
Read more: Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
Income thresholds and time limits
Although this new senior deduction may seem attractive, it isn’t permanent, and it isn’t available to everyone.
The full deduction is only applicable for those who earn $75,000 or less individually, or $150,000 or less as a couple. Beyond those thresholds, the deduction amount is gradually phased down and fully phased out at $175,000 for individual taxpayers, and $250,000 for couples.
If you attempt a Roth IRA conversion and the cash you convert pushes your adjusted gross income (AGI) over these thresholds, then your deduction could be impacted.
If you earn a relatively high income and are looking to convert a large amount, you could even eliminate the senior deduction completely, missing out on valuable tax savings.
For example, if a married couple had a household income of $140,000, and they were considering a $20,000 Roth IRA conversion, that move would push their AGI to $160,000, placing them beyond the $150,000 threshold for the new senior deduction, meaning they would not receive the full $12,000 deduction that was previously available to them.
That means the effective cost of converting to a Roth IRA could be higher than expected — not only because of the added taxable income, but also because you’d lose a valuable deduction in the process.
High-income households and backdoor Roth IRA contributions
With that being said, there are still ways for high-earners to access the benefits of a Roth IRA — in particular, that tax-free withdrawal come retirement.
Roth IRAs don’t allow joint filers making above $246,000 or individuals making more than $165,000 in modified adjusted gross income to make contributions. But there’s no rule stopping you from contributing to a traditional IRA and then converting it into a Roth IRA.
With that said, be careful if you have any other non-Roth IRAs, including those that may have rolled over from an existing 403(b) or 401(k). As far as the IRS is concerned, under pro-rata rules, all of your non-Roth IRAs will be assessed as one sum to determine the taxes owing on your after-tax IRA contribution.
This can torpedo your potential tax savings if you aren’t careful.
If that sounds complicated — and it is — the experts at Range are here to help. They provide all-in-one white-glove wealth management services for high-earning professionals and households making over $300,000.
This includes navigating the complexities of the backdoor Roth IRA tax strategy and even the mega-backdoor Roth IRA method. But Range Advisors can also offer proactive advice across your entire financial life, including alternative assets management — not just taxes.
From stock options and tax strategies to real estate and big-picture planning, Range integrates it all under one roof. With a transparent, flat annual fee — no hidden costs or percentage-of-assets surprises — you get AI-powered insights and comprehensive guidance designed to scale with your wealth.
The bottom line
You might consider spreading out your Roth IRA conversion over multiple years. For instance, instead of converting $20,000 this year, you could convert $7,000 every year for the next three years, maintaining your eligibility for the new tax deduction.
However, the senior deduction is only available for tax years 2025 through 2028, which means you have a limited window to maximize tax savings while converting to a Roth IRA account.
If you’re trying to figure out the best path forward, a certified financial planner can remove the guesswork from retirement planning.
Advisor.com can help connect you with a financial advisor suited to your needs, and based in your area. All of their advisors are pre-vetted fiduciaries, meaning that they have a legal obligation to act in your best interest.
After inputting your ZIP code to get matched with professionals near you, you can set up a free call with no obligation to hire, to make sure they’re a good fit for you.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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