How to Convert a Traditional IRA to a Roth IRA

A Roth conversion moves money from a traditional IRA into a Roth IRA in a single transaction

A Roth conversion is when you move money from a traditional IRA to a Roth IRA. You report the conversion on your tax return for that year, and you pay income tax on the amount you convert. After that, the money grows tax-free in the Roth, and you can withdraw it tax-free in retirement if you follow the rules.

The conversion itself is straightforward — you contact your IRA custodian (the bank, brokerage, or investment company holding your account) and ask them to transfer funds from your traditional IRA to your Roth IRA. The custodian handles the paperwork. What matters most is understanding the tax bill you'll owe and whether converting makes sense for your situation.

There is no income limit on who can do a Roth conversion. Anyone with a traditional IRA can convert, regardless of how much money they earn. This is different from direct Roth contributions, which have income limits.

Key Takeaways

• You pay income tax on the amount you convert in the year you convert it, so a large conversion can push you into a higher tax bracket.
• The conversion is reported on Form 8606, which you file with your tax return for that year.
• You can convert as much or as little as you want, and you can do multiple conversions in the same year or across different years.
• If you have both traditional and Roth IRAs, the IRS treats all your IRAs as one pool for tax purposes when you convert, which can create an unexpected tax bill.
• You have until the tax filing important date (usually April 15) to undo a conversion through a process called a recharacterization, though this option is limited.

How the conversion process works step by step

Contact your IRA custodian — the institution where your traditional IRA is held — and tell them you want to convert funds to a Roth IRA. You can convert the entire balance or just part of it. The custodian will ask you which Roth IRA you want the money to go to. If you don't have a Roth IRA yet, you'll need to open one first, either with the same custodian or a different one.

The custodian transfers the money directly from your traditional IRA to your Roth IRA. This is called a direct conversion or trustee-to-trustee transfer, and it's the cleanest route because the money never touches your hands. Some custodians also allow you to withdraw the money yourself and deposit it into a Roth IRA within 60 days — this is called an indirect conversion — but the direct method is simpler and avoids the risk of missing the 60-day window.

After the conversion is complete, you'll receive a Form 1099-R from your custodian showing the amount converted. You use this form to fill out Form 8606 when you file your taxes. The Form 8606 tells the IRS how much of the conversion is taxable.

Understanding the tax bill from a conversion

When you convert, you owe income tax on the amount you convert. The IRS treats the conversion as if you withdrew the money from your traditional IRA, which means it counts as taxable income for that year. If you convert $50,000, you add $50,000 to your taxable income on your tax return.

This can be a significant bill. If you're in the 24% federal tax bracket, a $50,000 conversion costs you $12,000 in federal tax. Some states also tax IRA conversions, so your total bill could be higher. The tax is due when you file your return — you don't pay it upfront to the IRS.

One exception: if your traditional IRA contains money you contributed but never deducted (called basis), that portion of the conversion is not taxable. For example, if you contributed $10,000 after-tax dollars to your traditional IRA and never deducted them, and your IRA is now worth $50,000, only $40,000 of a full conversion is taxable. You report your basis on Form 8606.

The pro-rata rule and why it matters if you have multiple IRAs

If you have both a traditional IRA and a Roth IRA, or multiple traditional IRAs, the IRS applies the pro-rata rule when you convert. This rule treats all your IRAs as one combined account for tax purposes, even if they're held at different institutions.

Here's how it works: suppose you have a traditional IRA with $100,000 (all pre-tax money) and a Roth IRA with $50,000. You want to convert $25,000 from the traditional IRA to the Roth. The IRS looks at your total IRA balance ($150,000) and calculates what percentage is pre-tax money: $100,000 out of $150,000 is 66.7%. So 66.7% of your $25,000 conversion — about $16,675 — is taxable. The remaining $8,325 is treated as a return of basis and is not taxed.

This rule often surprises people who thought they could convert just the after-tax portion of a traditional IRA. If you have a large pre-tax balance in any IRA, the pro-rata rule will make most of your conversion taxable, even if you're trying to convert only after-tax money. This is one of the most common reasons a conversion doesn't work out the way someone planned.

When a conversion makes financial sense

A conversion is usually worth considering if you expect to be in a higher tax bracket in retirement than you are now, or if you want to reduce the size of your traditional IRA to lower your required minimum distributions (RMDs) later. Converting also lets you move money into an account with no RMDs during your lifetime, which can help with estate planning.

A conversion can also make sense if you have a year with unusually low income — a year you were laid off, took unpaid leave, or had a business loss. In a low-income year, the tax bill from a conversion is smaller because you're in a lower tax bracket. Some people convert in chunks over several years to spread the tax bill across multiple years and stay in a lower bracket each year.

Conversions are generally not worth doing if you'll owe a large tax bill and you don't have cash outside your IRA to pay it. If you use IRA money to pay the tax, you're reducing the amount that grows tax-free, which defeats much of the purpose of converting.

Reporting the conversion on your tax return

You report a Roth conversion using Form 8606, which you file with your federal tax return. The form asks for the amount converted, the amount of basis (after-tax contributions) in your traditional IRA, and calculates how much is taxable.

Your custodian sends you a Form 1099-R in January showing the conversion amount. The form will have a code indicating it's a conversion. You use the 1099-R and your own records (especially records of any after-tax contributions) to complete Form 8606.

If you don't file Form 8606, the IRS may assume the entire conversion is taxable, even if part of it should have been tax-free basis. Filing the form correctly protects you if you have after-tax money in your traditional IRA.

Can you undo a conversion after it's done?

Until 2018, you could undo a conversion by filing a recharacterization — essentially reversing the conversion and moving the money back to the traditional IRA. This was useful if the market dropped after you converted and you wanted to avoid the tax bill on a now-smaller amount.

The Tax Cuts and Jobs Act eliminated recharacterizations for conversions done after 2017. You can no longer undo a conversion once it's complete. This means you should be confident about the decision before you convert, because you're locked in to paying the tax bill.

The only exception is if your custodian made an error in processing the conversion. In that case, contact them when ready to correct it.

Frequently Asked Questions

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

No. You can convert part of your traditional IRA and leave the rest in the traditional account. You can also do multiple conversions in the same year or spread conversions across different years. Each conversion is reported separately on Form 8606.

What happens to my required minimum distributions if I convert?

Converting reduces your traditional IRA balance, which lowers your RMD in future years. Roth IRAs have no RMDs during your lifetime, so money you convert will never be subject to RMDs. This is one reason people convert — to reduce the forced withdrawals they'll face later.

Can I convert if I'm already taking distributions from my traditional IRA?

Yes. You can convert at any age and at any time, regardless of whether you're already taking distributions. The conversion and the distribution are separate transactions. Both are reported on your tax return, but the distribution doesn't prevent you from converting.

What if I convert and then my income is higher than I expected that year?

You'll owe more tax than you planned, but you can't undo the conversion. The tax bill is due when you file your return. If you're concerned about this, you can convert a smaller amount or wait for a year when you expect lower income.

Does a Roth conversion affect my Social Security or Medicare?

A conversion increases your taxable income for that year, which can affect your Medicare premiums and the taxation of your Social Security benefits. If you're close to the income thresholds for these programs, a large conversion could push you over and increase your costs. Run the numbers with a tax professional before converting if you're on Medicare or receiving Social Security.