August 7, 2025
The Big Beautiful Bill has brought major tax changes, including affecting Roth IRA conversions. While converting traditional IRA funds to a Roth IRA can be beneficial for tax-free growth, the converted amount is taxed as ordinary income in the year of conversion. Recent tax law changes make it crucial to plan conversions carefully.
Though Trump-era tax cuts extend low tax rates for a few more years, new income limits on deductions mean a large Roth conversion could push your income above thresholds, causing loss of valuable tax breaks. A smart approach is to do partial Roth conversions yearly to “fill up” your current tax bracket without crossing into higher brackets or deduction phaseouts.
Several deductions phase out at higher income levels, including:
These phaseouts mean Roth conversions must be coordinated with your overall tax picture.
Many of these deductions expire by 2028 or 2029, creating a short window to optimize Roth conversions while rates are favorable and deductions are available.
Roth conversions can save you money in the long term—but only if done strategically, especially with the changes introduced by the Big Beautiful Bill. Consulting with your CPA is essential to model your income, avoid deduction losses, and develop a tailored plan. With careful timing and planning, you can maximize benefits and minimize risks, so start working with your trusted advisor now to make the most of today’s opportunities.
For more information, click here to review Larson & Company's One Big Beautiful Bill Act summaries.