As we near the end of 2025, taxpayers face a unique opportunity—one that may disappear with the sunset of the Tax Cuts and Jobs Act (TCJA). Among the most powerful moves available to those looking to reduce long-term tax burdens is a Roth conversion. For many individuals, converting pre-tax retirement accounts to Roth IRAs in 2025 could be a smart strategy before federal income tax rates potentially rise in 2026.
But as with most things in tax planning, the devil is in the details.
Why Roth Conversions Are So Attractive in 2025
The TCJA temporarily lowered federal income tax rates across most brackets, with the top rate reduced to 37% from 39.6%. If Congress does nothing, those rates will revert to pre-2018 levels starting in 2026.
That makes 2025 potentially the last year to convert at today’s lower tax rates—and to do so on your terms, not the IRS’s.
The key benefits of a Roth conversion:
- Tax-free growth: Roth IRAs grow tax-free, and qualified withdrawals are not taxed.
- No Required Minimum Distributions (RMDs): Unlike traditional IRAs, Roth IRAs are not subject to RMDs during the original owner’s lifetime.
- Tax diversification: Having both traditional and Roth accounts gives you more flexibility to manage taxes in retirement.
- Estate planning: Heirs can inherit a Roth IRA and receive distributions income-tax-free (though they must deplete it within 10 years).
For high-income earners, retirees in a temporary low bracket, or individuals nearing RMD age, 2025 could be the perfect time to make the move.
Who Should Consider a Roth Conversion in 2025?
Not every taxpayer benefits from a Roth conversion—but several groups may find 2025 especially advantageous:
- Early retirees: Those who have retired but haven’t started Social Security or RMDs yet often find themselves in a lower-than-normal tax bracket. This window may be ideal for spreading conversions across multiple years.
- High-income earners expecting higher future rates: If your marginal tax rate is likely to rise (either due to legislation or future income growth), converting now may save you in the long run.
- Those with large pre-tax retirement balances: The larger your traditional IRA or 401(k), the more you’ll owe in future RMDs—and the more you’ll be exposed to rising tax rates and higher Medicare premiums.
- Business owners or professionals with variable income: A lower-income year (e.g., due to a business sale or gap in consulting work) could open a short-term tax planning window perfect for Roth conversion.
Strategic Considerations: It’s Not Just About Taxes Today
While a Roth conversion can offer significant long-term benefits, it’s not without its challenges. That’s why a coordinated plan is essential.
Key factors to weigh before converting:
- Medicare Premiums (IRMAA): Roth conversions increase your Modified Adjusted Gross Income (MAGI), which can push you into higher Medicare Part B and D premiums.
- Social Security Taxation: A higher MAGI can also cause more of your Social Security benefits to be taxed.
- Timing and Sizing the Conversion: Convert too little, and you miss out on savings. Convert too much, and you might trigger a higher tax bracket, Medicare surcharges, or even Net Investment Income Tax (NIIT).
- Cash on hand to pay taxes: Ideally, you want to pay the tax on the conversion with non-retirement funds. Using IRA assets to cover the tax diminishes the long-term benefit of the conversion.
Why You Need Both a CPA and Financial Planner
Too often, Roth conversions are treated as a simple tax maneuver. But in reality, they’re a financial planning decision with long-term implications for:
- Retirement income
- Investment growth
- Healthcare costs
- Estate planning
That’s why it’s essential to have both your CPA and your financial advisor at the table. A well-orchestrated Roth conversion plan balances the short-term tax cost with long-term tax savings, cash flow needs, and your broader financial goals.
2025 may be a once-in-a-decade window to make a Roth conversion under favorable tax conditions. For many, it’s a chance to lock in tax-free growth, reduce future RMD burdens, and gain more control over retirement income planning.
But don’t go it alone. Roth conversions are powerful—but they must be personalized. Work with a qualified tax advisor and financial planner to determine the right amount, the right timing, and the right strategy for your unique situation.
Want to know if a Roth conversion is right for you? Schedule a personalized tax and retirement strategy session before the window closes.