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I am currently trying to convert as much of my wife’s traditional IRA to a Roth. I consider the 12% tax bracket the sweet spot as for every dollar after that the tax nearly doubles to 22%. Earlier this year I calculated what I think is the maximum income one can have for a couple 65+, married, filing jointly with no other complicating additional income, deductions, nor credits, and using the standard deduction. Some terminology may be incorrect. I would appreciate input into the correct IRS terms for those errors.
Since there are so many tax experts at this site I would like your input as to if my calculations are correct, or if not what am I missing. Again these calculations are for a base scenario.
My calculations results in a maximum income of $143,650.
Here are my numbers:
$96,950 top income in the 12% tax bracket
$31,500 standard deduction
$3,200 senior deduction
$12,000 new senior bonus
Am I correct?
Highly recommend the tax calculator referenced by Tom S. I am in the 12% bracket. This year because of the $12000 filing jointly additional standard deduction, only 74% our social security is being taxed instead of 85%. It took me a while to figure out the tax torpedo. Basically what it means for my situation is that if I take an additional $1000 out of my IRA it is taxed at 12%, but the taxable percentage of SS also increases. The amount that the percentage increases will depend on your individual numbers. For me it looks like the increase ends up being taxed at closer to 20%. For example, a $1000 would be taxed at 12% ($120) + $80 tax increase because all of my social security would be taxed at higher than 74%.
If you can wrap your head around this, you are doing better than I am. In the past the taxable percentage on SS stepped up to 85%. Now it varies and line 6 on the 1040 give a taxable amount that has to be calculated. This is just one more complication for seniors. Play around with the tax calculators to see how you will be affected. The only good thing is that you probably owe less in taxes than you expected.
from Tom S:
https://thefinancebuff.com/social-security-taxable-calculator.html
Fyi in case it applies: the new TY 2025 “enhanced deduction for seniors”, which starts at $6k for singles ($12k for couples with spouse born before 1/2/1961), decreases on a sliding scale if AGI (line 11b, Form 1040) is greater than $75k for a single filer, or $150k for a couple filing. See new Schedule 1-A, Part V. Something to keep in mind if doing Roth conversions and cutting it too close to the line. (Caveat – you need to check the forms themselves – I’m looking at my tax prep software’s version of the form, which may or may not be accurate at this point in time.)
I wouldn’t worry about cutting it close. There is no cliff to go over, just a phaseout as parkslope mentions. This is a 6% phaseout ($6k deduction over $100k range) so the effective marginal tax rate for the 22% bracket would be 22%*1.06=23.32%.
Or if you’re in the 12% income bracket and happen to push more qualified dividends or capital gains into the 15% bracket, it would be (12%+15%)*1.06=28.62%.
It phases out over the next $100,000 above $75k for singles and 150k for couples. Thus senior couples with AGIs above the 12% tax bracket will get partial deductions on their 22%-24% tax rates that don’t completely phase out until $250k ($175k for singles).
David. You’re a Rock Star. Way to go! I too am doing something similar converting what I can and still staying in the 12% bracket. Lord willing I should have a few more years to do the same thing. A little here a little there. Pretty soon it adds up.
Thanks for the Kudos Regan. One big advantage we over 65 have is the 6K per person additional deduction. For me and my wife it allows an additional 12K to be converted. This deduction is available through 2028 and will help tremendously with my attempt to completely convert all my wife’s traditional IRA to a Roth before we collect our maximum Social Security benefits. With the increase in the markets in the past 2 years it has been hard to get the traditional balance down. Certainly a fortuitous first world problem. But there is the caveat that the additional senior deduction is certainly adding to the budget deficit.
I’m jealous of you folks who can take advantage of this temporary deduction. I turn 65 just after it expires. But I’m happy not to worry about it complicating my Roth conversion calculations.
You would probably be happier if you were not eligible for the deduction🤑 in any case.
I’m 76, never married, and my only close relatives don’t need any inheritance from me (I’ve discussed it with them). I’m unlikely to run out of money during my lifetime and any balance will go to charities.
When I had the chance before I started Social Security, I always topped up my tax bracket by converting money from my traditional IRA to my Roth. I later realized that I probably over did it. The charities won’t pay taxes on the funds, so I likely wasted money by paying taxes on the conversions. I’m trying now to give the charities as much as prudent during my lifetime via QCDs.
There are so many moving parts and individual situations to make reliable comments.
Add to it the fact that the future is unknown and you get more complications.
Single or married, when you or wife will take SS,
how much you already have in taxable, Roth IRA, TIRA
What state you live in which affects state tax
Until what age are you going to live.
Example: if you 65 and have $500K in TIRA conversation up to IRMMA makes sense. If you have 1-2 millions, converting to 22% brackets make sense too based on… your individual situations.
The whole thing of SS, converting, LTC, depends on individual situations and predicting the future.
I made lots of calculations. Then I met a CPA and he verified that we should convert about $250-280K annually, otherwise we will pay a lot more in the next 20 years. If we live 25-30 years and one of us is gone, taxes will be worse. Our portfolio will be similar or bigger in 20 years with min taxes.
I’m guessing you’re aiming to land your income just under the top of the 24% tax bracket. Do you try to stay under a particular IRMAA threshold, or just manage to the tax bracket and let the IRMAA chips fall where they may? You’ve accepted that you will break the NIIT threshold by a long shot, so there’s no way around that.
I congratulate all of you for your preparation to remain in that Low tax bracket. Keep up the great work.
For those of you the ARE collecting SS and want to do similar calculations on the Roth conversion effect on tax brackets, I suggest this calculator to help avoiding the “SS tax torpedo”.
https://thefinancebuff.com/social-security-taxable-calculator.html
Based on your numbers presented this won’t apply to you as you will be well under the limit but I am posting this in case others are thinking about what you are doing. Your Medicare B and D premiums are affected by what your modified adjusted gross income is 2 years prior to the year you are paying the premiums. For those interested to find out more see:
https://www.ssa.gov/benefits/medicare/medicare-premiums.html
You are right Liz I am not close to the IRMAA income, but close to the income limit for the full newly created enhanced senior deduction of 150K. I think staying in the 12% maximum tax rate results in the full deduction. In retrospect I’m thinking that is how they determined the maximum income for the full deduction, but not sure.
David, your numbers are spot on. We do the same thing after adjusting for a couple unique situations affecting our income. If your income is “basic” as you alluded to, I don’t think there’s any need or value to overcomplicating this with third party software. But I am but a simple man. 🙂 I do it all on a simple Excel spreadsheet. We take one SS benefit and include it at 85%. Already have the 2026 one good to go with the new tax brackets, standard deductions, and projected income. $100,800 for top of 12% bracket plus $32,200 standard deduction, plus $3,300 >65, plus $12K OBBB. Total gross income of $148,300 for planning purposes. Total Federal tax at that level is $11,600. Good luck!
Like you we are in the 12% tax bracket. For several years I had been doing Roth conversions to the upper limit of the 12% bracket. Last year instead of a Roth conversion I chose to do tax gain harvesting up to the 0.0 tax bracket. on LTCGs. On roth conversions I would had to still pay Federal and State taxes. Capturing the gains in the zero % tax bracket made those gains tax free vs 12% tax on a roth conversion.
I second Dan & Jim’s recommendation to use quality software to project your income to stay within the 12% bracket. As you have not started social security you should avoid the unwelcome non-intuitive surprise result of a Roth conversion causing additional amount of any social security benefits to become taxable in your future tax years. I know that currently for me any additional $1.00 of ordinary income causes $ 0.85 of my social security benefit to become taxable. Thus my 2025 federal 10% bracket has a marginal tax rate of 18.5% and my 12% bracket has a 22.2% marginal rate.
Bill, I’m a little confused about all but your first sentence. How can my Social Security benefit be taxable if I am not receiving it?
Also I know up to 85% of Social Security benefits are taxed at the federal level for married couples filing jointly with a “combined income” over $44,000. I and I assume most HD readers’ income is well above $44K.
Please expound.
When I say “I know that currently for me” I am talking about my own 2025 personal tax status not yours. I noted in reading your post that you are not claiming or receiving your SS benefit in 2025 in your comments so while my comment does not apply to you in 2025 there may be other that read this post who are taking SS in 2025 and I was hoping to help them avoid the “SS tax torpedo” as this situation is often referred to. I should have included “in your future tax years“, sorry that I was unclear. I have updated my prior post.
The key take away for you or others is the strong advice to use good tax software in tax planning if part of your income includes any social security benefits. I like the free AARP tax calculator planning software as licensed by Dinkytown.net to the AARP.
I agree that most HD readers income is over $44K but you really have to work through the taxable SS computation and also consider your standard deduction (or itemized deductions), the new senior deductions, IRA contributions, etc. to get to your own projected taxable income. As I have earned income in 2025 I have the ability to make deductible 2025 IRA contributions in 2026 and my last $1 will be taxed at either a marginal rate of 18.5% or 22.2 % depending on the size of my IRA contribution. I have until 4/15/2026 to fund my 2025 IRA contribution and I am waiting until 2026 to pull the trigger in case congress gives us a last minute surprise 2025 tax law change. I hope that we have no last minute tax changes or any 2026 change retroactive to 2025.
I hope that clarifies my earlier comment. Best wishes for a happy 2026.
I wish they would make this more challenging so I would have something to do all winter instead of drinking hot chocolate…
Bill, Thanks for clarifying. I was hoping to elicit a reply from you. You are very knowledgeable on these subjects and I really value your opinion.
David, I agree with Jim Burrows below. I suggest going to a tax prep website in order to plug in your numbers. I use FreeTaxUSA for both planning and the actual preparation of my tax return. (FreeTax is up and running with the new tax rules).
Good luck with the conversions.
Those numbers look good. I would encourage you to look at three complicating incomes that are common for couples 65+. Those are social security, qualified dividends and long-term capital gains. Doing so can greatly change the effective income tax rate on your Roth conversions. Like from 12% to 32%.
Thanks for the look see Jim. We are delaying social security, and don’t have any capital gains. I have accounted in my personal figures a $3K capital loss carry forward which I did not include in the example as I was trying to keep the example generic.
OPPS! I twice wrote about capital gains, second reference deleted. Second sentence should have read we only have non qualified dividends from a taxable bond ETF.
This is what happens when you rush to finish a post because the wife wants to start decorating the Christmas tree. 😂
Don’t forget the qualified dividends. You are much more likely to have some of those than capital gains if one is a long-term investor and has assets in non-tax advantaged accounts. For those in the 12% bracket they are often tax free. If you max out the bracket with your Roth conversion they won’t be.
Assuming married filing jointly, both at least 65, and all income is “ordinary”:
Maximum gross income 2025 for 12% bracket: $143,650
Maximum gross income 2026 for 12% bracket: $148,300 (increase of $4,650)
But Social Security benefit income and other non-ordinary income will affect these amounts.