If you live in Dallas-Fort Worth and you’re sitting on a large traditional IRA or 401(k), a Roth conversion deserves a serious look — and Texas gives you a structural advantage most of the country doesn’t have. Texas has no state income tax, so the tax you pay on a conversion is federal only. The same conversion in California can carry an extra 9.3% to 13.3% in state tax on top of the federal bill. In Dallas, that state layer is zero. This page covers how conversions work, the 2026 tax landscape, who in DFW benefits most, the IRMAA and 5-year-rule traps, and — just as important — when converting is the wrong move. For the full mechanics, see our full Roth conversion guide.
Talk it through with a local advisor. Johnny Borrelli is an Investment Adviser Representative serving Dallas-Fort Worth — in person or by phone. Call (214) 203-9192.
A Roth conversion moves money from a traditional IRA (or an eligible 401(k)) into a Roth IRA, and you pay ordinary income tax on the converted amount in the year the conversion happens.
That’s the whole transaction. Afterward, the money grows inside the Roth IRA, and qualified withdrawals in retirement come out federal-income-tax free — no tax on the growth again, as long as you follow the IRS rules. The trade is straightforward: pay tax now at a known rate to remove the tax uncertainty later. The real question is whether paying tax today costs less than the tax you’d otherwise pay down the road on withdrawals and required minimum distributions.
A few mechanics worth knowing up front. There is no limit on how much you can convert in a year and no income cap on who can convert — those limits apply to Roth contributions, not conversions. A conversion counts for the tax year in which it is completed, so a conversion finished by December 31, 2026 is a 2026 tax event. And since 2018, Roth conversions cannot be undone — Congress eliminated recharacterization for conversions, so once you convert, the tax bill is final. That last point is why the planning matters more than the paperwork.
Here’s where living in Dallas-Fort Worth pays off directly.
When you convert, the converted amount is added to your taxable income for the year. In Texas, that’s the end of the story: federal income tax and nothing to the state. In California, the identical conversion is taxed as ordinary income at rates up to 13.3% — tens of thousands of dollars more for the same transaction. Our breakdown of how state taxes change Roth conversion math has more state-by-state examples, but the headline for Texans is simple: your conversion dollar goes further with no state tax bite.
Take a $200,000 conversion for a married couple already in the 22% federal bracket, so the conversion is taxed at 24% — roughly $48,000 in federal tax. In Texas, that’s the total cost. In California, the same conversion could face roughly another $18,000 to $26,000 in state tax. Same conversion, same federal rules, very different price tags — the difference is entirely about where you live.
Conversions are taxed at your marginal federal rate, so the 2026 brackets are the starting point for every decision.
The One Big Beautiful Bill Act, signed in July 2025, made the 2017 tax law’s rate structure permanent — rates did not snap back to 39.6%. For 2026 the seven federal rates remain 10% through 37%, with inflation-adjusted thresholds (IRS Rev. Proc. 2025-32). The 2026 standard deduction is $16,100 (single) and $32,200 (married filing jointly):
| Rate | Single (taxable income) | Married filing jointly |
|---|---|---|
| 10% | Up to $12,400 | Up to $24,800 |
| 12% | $12,400 – $50,400 | $24,800 – $100,800 |
| 22% | $50,400 – $105,700 | $100,800 – $211,400 |
| 24% | $105,700 – $201,775 | $211,400 – $403,550 |
| 32% | $201,775 – $256,225 | $403,550 – $512,450 |
| 35% | $256,225 – $640,600 | $512,450 – $768,700 |
| 37% | Over $640,600 | Over $768,700 |
These apply to taxable income — income after deductions — not gross income. The practical move is “bracket filling”: sizing each year’s conversion to fill out the rest of your current bracket instead of tipping over into the next one. A married couple with $150,000 of taxable income has roughly $61,000 of headroom left in the 22% bracket before the 24% bracket begins at $211,400. Converting that headroom each year — rather than one huge lump at 32% or 35% — is how most DFW savers keep the lifetime tax cost down. Thresholds are inflation-adjusted yearly by the IRS, so confirm the current year’s figures before acting.
Three profiles show up again and again in the Dallas-Fort Worth market.
DFW business owners with lumpy income. North Texas is full of owners whose income swings year to year — a big contract year followed by a quiet one, a sale on the horizon. Low-income years are conversion gold: when taxable income dips, you can convert at 12% or 22% instead of 32% or 35%. Watch your income each fall, estimate where the year lands, and convert into the remaining bracket headroom before December 31. And plan ahead of a business sale — the sale year spikes income into the top brackets, which is exactly when you don’t want to add a conversion on top.
Pre-retirees filling low brackets before RMDs begin. The years between retirement and age 73 (or 75, depending on birth year) are often the lowest-income years of a saver’s life: no paycheck, Social Security maybe not started, and required minimum distributions not yet begun. Converting during that window — filling the 12%, 22%, or 24% bracket each year — shrinks the traditional IRA balance that will later drive RMDs. Smaller RMDs mean less forced taxable income in your late 70s and 80s. Our overview of required minimum distributions covers when they start and how they’re calculated.
Soon-to-be Medicare enrollees who can plan around IRMAA. This one cuts both ways. A large conversion at 63 or 64 raises your modified adjusted gross income, and Medicare looks back two years — so income at 63 sets your premiums at 65. But getting conversions done before the lookback window, or sizing them under IRMAA thresholds, keeps premiums at the standard rate. The IRMAA section below has the 2026 numbers.
This is the single most important execution detail, and it’s where conversions succeed or fail.
The best practice is paying the conversion tax from non-IRA funds — cash in a taxable account, not from the IRA being converted. Every dollar pulled from the IRA to pay the tax is a dollar that never reaches the Roth, which shrinks the whole benefit — and if you’re under 59½, withheld amounts can trigger the 10% early-withdrawal penalty on top of income tax. Our walkthrough of paying the conversion tax from non-IRA funds covers the mechanics and exceptions, but the rule of thumb stands: if you can’t cover the tax from outside the retirement accounts, the conversion usually isn’t worth doing yet.
Roth IRAs have not one but two 5-year clocks, and they trip up more people than any other part of the rules. The first clock applies to each conversion: if you’re under 59½ and withdraw converted money within five years, the 10% early-withdrawal penalty applies to the taxable portion (each year’s conversion starts its own clock). The second clock applies to earnings: for earnings withdrawals to be qualified — completely tax-free — the Roth IRA must have been open at least five years and you must be 59½ or meet another qualifying condition. Contributions can always be withdrawn tax- and penalty-free. Our full explanation of the Roth 5-year rules covers the edge cases; the practical takeaway is that conversions reward patience and punish early withdrawals.
Medicare’s Income-Related Monthly Adjustment Amount — IRMAA — is a surcharge on Part B and Part D premiums for higher-income enrollees, and it’s the stealth tax on oversized Roth conversions. Medicare sets your premiums using your modified adjusted gross income from two years earlier — IRMAA’s two-year lookback. A $150,000 conversion at age 63 shows up in your MAGI at 63 and raises your Medicare premiums at 65. The surcharges are cliff-based — crossing a threshold by even $1 triggers the full higher premium for the tier. For 2026 (based on 2024 MAGI, per CMS), the standard Part B premium is $202.90/month, with the first IRMAA tier at $109,000 MAGI (single) or $218,000 (joint):
| 2024 MAGI (single) | 2024 MAGI (joint) | Part B/month (2026) | Part D surcharge/month |
|---|---|---|---|
| $109,000 or less | $218,000 or less | $202.90 | $0 |
| $109,001 – $137,000 | $218,001 – $274,000 | $284.10 | $14.50 |
| $137,001 – $171,000 | $274,001 – $342,000 | $405.80 | $37.50 |
| $171,001 – $205,000 | $342,001 – $410,000 | $527.50 | $60.40 |
| $205,001 – $499,999 | $410,001 – $749,999 | $649.20 | $83.30 |
| $500,000+ | $750,000+ | $689.90 | $91.00 |
The planning implication is concrete: a married couple at $200,000 MAGI considering a $100,000 conversion wouldn’t just pay 24% federal tax — the extra income would push them past the $218,000 first threshold and add roughly $1,150+ per person per year in IRMAA surcharges two years later. Sometimes the right answer is a smaller conversion under the threshold, or converting earlier — at 60 or 61 — so the lookback years clear before Medicare enrollment.
Honest guidance means saying no sometimes. A conversion is the wrong move when any of these apply.
You’d have to raid the IRA to pay the tax. If the only way to cover the tax bill is withholding from the conversion itself — especially under 59½, where the 10% penalty can apply — the math usually collapses. Wait until you have outside funds.
The conversion pushes you into a bracket far above your future rate. Converting at 32% today to avoid 22% later is paying more tax, not less — usually the result of one giant lump conversion instead of smaller annual ones.
You’ll need the money soon. Money you expect to spend within a few years shouldn’t be converted — the 5-year clocks and the upfront tax cost argue for leaving near-term spending money where it is.
An IRMAA cliff makes the true cost far higher than your bracket. As the table above shows, a conversion that looks like it’s taxed at 24% can carry an effective marginal cost well above 30% once two years of IRMAA surcharges are included. Near a threshold, precision matters more than speed.
You’re planning large charitable gifts. Qualified charitable distributions must come from a traditional IRA — converting first shrinks the account you give from. Coordinate the two strategies rather than converting blindly.
Roth conversion planning is genuinely local work. The federal rules are the same everywhere, but the Texas tax advantage, your bracket headroom, IRMAA timing, and RMD projections all interact — and getting the sizing and timing right is where the value lives. Johnny Borrelli is an Investment Adviser Representative serving Dallas-Fort Worth — in person for DFW clients or by phone wherever you are. If you’re weighing a conversion for 2026, the useful next step is a conversation about your numbers: bracket headroom, IRMAA exposure, and a multi-year schedule.
Call (214) 203-9192 to talk through whether a Roth conversion fits your plan.
You pay federal ordinary income tax on the converted amount at your marginal rate — there is no separate “conversion tax.” In Texas you pay no state income tax on the conversion, unlike California where the same conversion can carry up to 13.3% more in state tax. Your total cost depends on the headroom left in your current federal bracket.
A conversion counts for the tax year in which it is completed, so it must be finished by December 31, 2026 to be a 2026 tax event. Unlike IRA contributions, there is no April extension. Conversions cannot be undone after 2018, so the decision is final once executed.
It can, through IRMAA. A conversion increases your modified adjusted gross income, and Medicare uses MAGI from two years prior to set Part B and Part D premiums. For 2026, the first IRMAA tier starts at $109,000 MAGI (single) or $218,000 (joint) based on 2024 income. Sizing conversions to stay under thresholds — or completing them before the lookback window — is a key part of planning near age 65.
No. Congress eliminated the recharacterization of Roth conversions starting in 2018. Once a conversion is complete, the tax consequences are final. This is why bracket analysis and IRMAA modeling should happen before the conversion, not after.
From savings — non-IRA funds — whenever possible. Paying from the IRA shrinks the amount that reaches the Roth, and if you’re under 59½, amounts withheld for taxes may face the 10% early-withdrawal penalty in addition to income tax. If you can’t cover the tax from outside funds, it’s usually better to wait.
Each conversion starts its own 5-year clock for the 10% early-withdrawal penalty if you’re under 59½. Separately, earnings are only tax-free when the Roth IRA has been open five years and you meet a qualifying condition such as reaching 59½. Contributions can always be withdrawn tax- and penalty-free.
In your lowest-income years. Review your projected taxable income each fall and convert into the remaining headroom of your current bracket before December 31. Avoid converting in the same year as a business sale or other income spike, when the conversion would stack on top of already-high income.
The transaction is simple — most custodians process conversions online. The planning is the hard part: multi-year bracket filling, IRMAA thresholds, 5-year-rule timing, and coordinating RMDs and charitable plans. A local advisor can model scenarios you’d likely miss on your own.
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