When you convert a traditional 401(k) to a Roth IRA, the pre-tax amount you move is taxed as ordinary income at your marginal federal rate for the year of the conversion. There is no special conversion rate. In 2026, federal brackets run from 10% to 37%, and the converted balance stacks on top of your other income, so most conversions get taxed across several brackets at a blended effective rate rather than a single number. The tax rate when converting a 401(k) to a Roth IRA depends on how much you convert and how much you already earn that year.
Why the Conversion Is Taxed as Ordinary Income
Traditional 401(k) contributions went in before taxes. You took a deduction when you contributed and the money grew untaxed. In exchange, every dollar coming out is taxed as ordinary income. A Roth IRA is the opposite arrangement: after-tax dollars go in and qualified withdrawals come out tax-free.
Converting crosses from one treatment to the other, and the IRS collects the income tax it deferred. For federal purposes, the converted amount is treated like wages or a year-end bonus. Once the money is inside the Roth IRA, future growth and qualified withdrawals owe nothing to the IRS, and there are no required minimum distributions during the original owner’s lifetime.
2026 Federal Tax Brackets Your Conversion Runs Through
These brackets, released by the IRS following the passage of the One Big Beautiful Bill Act, apply to 2026 taxable income. The standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly, so taxable income starts at least that much below your gross.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
- 10%: up to $12,400 single / $24,800 joint
- 12%: $12,401–$50,400 single / $24,801–$100,800 joint
- 22%: $50,401–$105,700 single / $100,801–$211,400 joint
- 24%: $105,701–$201,775 single / $211,401–$403,550 joint
- 32%: $201,776–$256,225 single / $403,551–$512,450 joint
- 35%: $256,226–$640,600 single / $512,451–$768,700 joint
- 37%: over $640,600 single / over $768,700 joint
How the Rate Is Actually Calculated
The conversion doesn’t get taxed at one flat rate. It stacks on top of your other income for the year. The first dollars of the conversion fill whatever space is left in your current bracket, and any excess spills into the next bracket up, and the next after that.
Take a married couple filing jointly with $150,000 in taxable income from wages. That already fills the brackets through most of the 22% band, which tops out at $211,400 for joint filers. If they convert $100,000 from a 401(k), the first $61,400 fills the rest of the 22% bracket and is taxed at 22%. The remaining $38,600 lands in the 24% bracket. The blended federal rate on the conversion works out to about 22.8%, not the 24% top marginal rate the last dollar reaches.
This blending is why the effective rate on a conversion is almost always lower than the highest bracket the income touches. It also means the conversion itself lifts your marginal rate, which matters for any other income arriving later in the year. Using last year’s bracket to estimate the tax is a common miss, because the conversion changes the math it’s sitting inside.1Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
Hidden Costs That Raise Your Effective Rate
The bracket math is only the direct bill. A large conversion inflates adjusted gross income for the year and can pull several other taxes and surcharges along with it.
Medicare Premium Surcharges
Medicare uses modified AGI from two years earlier to set current premiums, so a 2026 conversion determines 2028 Part B and Part D premiums.2Medicare. 2026 Medicare Costs For 2026, the Income-Related Monthly Adjustment Amount begins when modified AGI exceeds $109,000 single or $218,000 joint. Above those thresholds, monthly Part B surcharges run from $81.20 to $487.00 per person, with additional Part D surcharges on top.3Centers for Medicare & Medicaid Services. 2026 Medicare Parts A and B Premiums and Deductibles
More of Your Social Security Becomes Taxable
If you collect Social Security, the conversion feeds into the “combined income” formula (AGI plus tax-exempt interest plus half your benefits). Above $25,000 single or $32,000 joint, up to 50% of benefits become taxable; above $34,000 single or $44,000 joint, up to 85% do. These thresholds have never been indexed for inflation, so a sizable conversion easily pushes retirees into the top tier.
Net Investment Income Tax
The 3.8% net investment income tax applies to investment income once modified AGI passes $200,000 single or $250,000 joint. The conversion itself isn’t investment income, but the higher AGI it creates can drag your existing dividends, capital gains, and rental income into the surtax.4Office of the Law Revision Counsel. 26 USC 1411 – Imposition of Tax
Capital Gains Bump
Long-term capital gains are taxed at 0%, 15%, or 20% depending on total taxable income. In 2026, the 0% rate applies to joint filers up to $98,900 and single filers up to $49,450. A conversion that pushes taxable income past those cutoffs can move gains realized the same year from 0% to 15%.
Credit and Deduction Phaseouts
Plenty of tax benefits phase out with AGI. A conversion can shrink or eliminate the premium tax credit for marketplace insurance, education credits, the child tax credit, and the ability to deduct traditional IRA contributions. If you’re near the edge of a benefit you count on, model the full effect before pulling the trigger.
After-Tax 401(k) Money Isn’t Taxed Again
Not every dollar in a 401(k) went in pre-tax. Any after-tax contributions you made are basis, meaning they’ve already been taxed once. Converting that portion owes nothing more.
Plan administrators track pre-tax and after-tax balances separately. On a full conversion, only pre-tax contributions and all earnings are taxable; the after-tax basis converts tax-free. Your 1099-R should reflect the split, with Box 2a showing the taxable amount and Box 5 showing employee after-tax contributions.5Internal Revenue Service. Form 1099-R – Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Check those numbers against your own records before filing.
Worth knowing: the pro-rata rule that forces traditional IRA conversions to blend pre-tax and after-tax money proportionally does not apply to 401(k) plans, because employer plans aren’t individual retirement plans under the statute.6Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts That’s why a direct 401(k)-to-Roth conversion can cleanly isolate after-tax basis.
How to Lower the Rate You Actually Pay
Converting an entire 401(k) in one year can be brutally expensive because the top slices of the conversion get pushed into high brackets. Nothing requires you to convert all at once, and spreading the conversion across tax years is the most effective way to control the rate.
- Fill your current bracket, not the next one. If you’re in the 22% bracket with $60,000 of headroom before the 24% band, converting exactly $60,000 keeps every dollar of the conversion at 22%. Repeat in future years.
- Convert during low-income years. A gap between leaving a job and starting Social Security, a sabbatical, or an unusually slow year opens space in the lower brackets. A conversion that would cost 32% during peak earnings might cost 12% or 22% in a gap year.
- Convert after a market drop. If the balance falls from $200,000 to $160,000, you pay tax on $160,000. Any recovery then happens inside the Roth IRA, tax-free.
- Front-load before RMDs start. The window between retirement and age 73 is often the lowest-income stretch you’ll have. Conversions in that window shrink future required minimum distributions and the higher AGI that comes with them.
One habit worth building: pay the conversion tax from outside funds rather than from the converted balance. Using converted money to cover the bill can trigger the 10% early withdrawal penalty if you’re under 59½, and it shrinks the balance that gets to grow tax-free.7Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
State Income Tax Adds to the Federal Rate
Federal tax is only part of the bill. Most states with an income tax treat a Roth conversion the same way the IRS does, folding the converted amount into taxable income for the year. State rates vary widely, and a conversion that looks manageable federally can become noticeably more expensive after the state layer.
Nine states impose no state income tax at all: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Residents there owe nothing at the state level on the conversion. If a move to a no-income-tax state is already in your plans, completing the conversion after establishing residency there removes the state tax entirely.