It seems like every day there’s another article about Roth conversions. While they’re a powerful tool for tax planning, they aren’t always the right choice. Sometimes it makes more sense to keep money in tax-deferred accounts. Although long-term tax planning can feel complex, determining how much to convert each year becomes much simpler when you follow a clear, repeatable process. This guide will walk you through that process, step by step.

Step 1: Start With a Tax Projection—There’s No Way Around It

Before you decide how much to convert, you need a current-year income and tax projection. There’s simply no substitute for this. If you don’t know your starting point, you can’t know how much room you have before hitting a higher tax bracket or triggering other taxes.

You don’t need to be a CPA or buy expensive software. Tools like:

• the DinkyTown 1040 Calculator
• TurboTax or similar tax preparation software

can give you a quick, reliable tax estimate.

Step 2: Estimate Your Income for the Year

To understand how much Roth conversion income you can add, you must estimate your total income for the year. Some components are easy; others take a little adjusting.

Easy-to-estimate income

• Wages
• Social Security
• Pensions

Harder-to-estimate income

• Interest
• Dividends
• gains
• Required or elective IRA/401(k) withdrawals

Expect these estimates to change throughout the year, especially dividends, interest, and capital gains. That’s why reviewing your projection later in the year is so important.

Step 3: Choose the Tax Goal for Your Conversion Plan

Not everyone converts for the same reason. Your tax-efficient conversion amount depends on which goal matters most to you.

Here are the four most common goals:

1. Staying in a Specific Tax Bracket

Since the U.S. tax system is marginal, you only pay the higher tax rate on the top dollars of your income. Many people convert up to the top of their current tax bracket without crossing into the next one.

For example:

• If your natural taxable income puts you in the 22% bracket, you may convert until you reach the top of that bracket.
• The jump from 22% to 24% is small enough that many people choose to fill the 24% bracket, too.
• But the jump from 24% to 32% is much larger and often avoided.

This is a simple and effective strategy for many households.

2. Managing Medicare IRMAA Surcharges (Age 63+)

If you’re 63 or older, your income today affects your Medicare premiums two years from now.

Higher income can push you into an IRMAA tier, an extra monthly surcharge tacked onto your Medicare Part B and Part D premiums.

Some IRMAA tiers are minor. Others can cost you thousands of dollars per year. Before converting, check which tier you’re currently in and how close you are to the next one.

That said, IRMAA shouldn’t automatically stop you. Paying a bit more today might still reduce your lifetime taxes overall.

3. Avoiding the 3.8% Net Investment Income Tax (NIIT)

NIIT is a 3.8% tax that applies to investment income (interest, dividends, capital gains, rentals) when your modified adjusted gross income exceeds:

• $200,000 (Single)
• $250,000 (Married filing jointly)

Roth conversions themselves aren’t subject to NIIT, but they can push you over the threshold where your investment income becomes taxable.

Knowing your projected income helps you decide whether it’s worth crossing that line.

4. Preserving Affordable Care Act (ACA) Premium Tax Credits

If you’re not on Medicare yet and buy insurance through the ACA Marketplace, your premiums depend heavily on your household income.

More income from a Roth conversion can reduce or eliminate your premium tax credits.

Since ACA subsidies can be worth thousands of dollars per year, this is an area where careful planning is essential. For many people, the value of today’s subsidy outweighs the long-term benefit of a large conversion, but every situation is different.

Step 4: Re-Run Your Numbers Later in the Year

The best time to finalize your conversion amount is usually towards the end of the year. By then:

• Most of your dividends have been paid
• Interest totals are clearer
• You know how much you’ve withdrawn from retirement accounts
• You’ve likely completed any major asset sales
• You have a clearer sense of whether you’re near a tax bracket or threshold

Running a fresh projection in the fall helps you refine your conversion amount and avoid surprises.

Putting It All Together

Roth conversions are part tax science, part financial art. Long-term projections are useful, but they’re built on assumptions about future tax rates, markets, and income needs, all things no one can predict perfectly.

But annual conversion decisions? Those are manageable.

To determine your ideal conversion amount each year:

1. Run a tax projection
2. Estimate your income
3. Choose which tax goal matters most
4. Re-run your numbers in the fall

By focusing on the current year and staying within your chosen thresholds, you can build an intentional, tax-smart conversion strategy that improves your long-term retirement picture without jeopardizing your short-term financial stability.