How the 2027 Tax Brackets Could Affect Your Roth Conversion Timing

Higher 2027 bracket thresholds may make some retirees think about putting off Roth conversions so they can move more money at the same tax rate. But the delay can come with tradeoffs, including effects on Social Security, Medicare, and capital gains taxes that may reduce the benefit.

The IRS has released its inflation adjustments for tax year 2027 under Revenue Procedure 2026-35, and the updated brackets change the calculation for Roth conversions. A conversion is included in gross income in the year the amount is distributed or transferred from a traditional IRA (26 CFR 1.408A-4, A-7). Under a “fill the bracket” approach, you convert enough to reach the top of your current bracket without spilling into the next one. The width of that bracket determines how much room you have.

How Much the Brackets Shifted

Each amount below shows the taxable income level where a rate begins, plus the standard deduction.

Because every bracket edge rises in tax year 2027, more income fits at each rate. That leaves a straightforward choice: convert before the end of the year using the 2026 brackets, or wait and take advantage of the broader 2027 ranges. Waiting gives you more room at the same rate, but it also means one more year of tax-deferred growth outside the Roth and one less year of tax-free compounding inside it. The two approaches can also be combined, with a household filling part of the 2026 bracket and then doing the same again in 2027.

Example: A Retired Couple

Example: a retired married couple filing jointly with $150,000 of pension and interest income in both years. For simplicity, the example uses only the basic standard deduction and does not include the extra deductions available to taxpayers age 65 and older.

Tax Year 2026

1. Taxable income: $150,000 minus $32,200 equals $117,800.
2. That puts the couple in the 22% bracket, which ends at $211,400.
3. Available room: $211,400 minus $117,800 equals $93,600 of conversion space at 22%.

Tax Year 2027

1. Taxable income: $150,000 minus $33,200 equals $116,800.
2. The 22% bracket now ends at $218,250.
3. Available room: $218,250 minus $116,800 equals $101,450.

That leaves $7,850 more room at 22% in 2027.

Why the Bracket Math Is Not the Whole Story

A taxable conversion is treated as income for all purposes, including the taxable portion of Social Security under section 86 (26 CFR 1.408A-4, A-9). In other words, a conversion can increase the share of benefits that becomes taxable. The 3.6% COLA for 2027 also increases benefit income that feeds into that calculation.

Medicare’s IRMAA surcharge uses income from two years earlier, and the thresholds that will apply to 2026 income have not yet been released. For reference, the 2026 standard Part B premium is $202.90 a month. For joint filers above $218,000, the total rises to $284.10. If the couple converted their full 2026 bracket, their income would reach $243,600, which is well above that threshold.

Capital gains brackets are also tied to taxable income. Conversion income is counted first, and gains are stacked on top of it, so a conversion can move capital gains into a higher tax band than they would otherwise have faced.

Common Rules That Can Catch Converters Off Guard

• Year-end deadline: The conversion is taxed in the year the transfer from the traditional IRA occurs, so it must be completed by Dec. 31.
• No undo option: Section 408A(d)(6)(B)(iii) does not allow recharacterizing a conversion.
• RMDs come first: Section 408(d)(3) bars rolling over a required minimum distribution. In an RMD year, the first dollars taken out are treated as the required minimum distribution (26 CFR 1.408A-4, A-6).
• Basis matters: If you have nondeductible basis, it is applied under Section 408(d)(1) and (2), and you report it on Form 8606.

How to Think About 2026 and 2027

Converting in 2026 may work better for households that could lose their low-bracket space once RMDs or Social Security start, and for those with non-IRA funds available to pay the tax. That period between retirement and required withdrawals is often the lowest tax window a retiree will see again, which is the focus of our free Roth window guide.

Waiting for 2027 may make sense for households with unusually high 2026 income, for those close to an IRMAA threshold, and for anyone who would benefit from the wider brackets.

Conversions may not be a good fit for people who would need IRA money to pay the tax, those expecting a lower bracket later, or those planning to leave the IRA to charity. Roth IRAs do not require minimum distributions while the owner is alive, which can matter more for heirs than for the account owner.

After that, watch for CMS’s IRMAA thresholds and the capital gains breakpoints in Revenue Procedure 2026-35, and then review the numbers before the year ends.