Last year's July 4 tax legislation didn't eliminate the case for Roth IRA conversions, but it changed planning equations for advisors weighing whether clients should pay taxes now in exchange for tax-free growth later.
By permanently extending the 2017 tax rates and expanding some deductions, the One Big Beautiful Bill Act created new opportunities to offset the tax cost of conversions for some clients while reducing concerns that future tax rates would automatically rise. As a result, advisors say Roth conversions remain a useful strategy in the right situations, such as to reduce future required minimum distributions, enhance estate planning and more.
"This is a year-by-year thing," said Alex Velazquez, the Stamford, Connecticut-based senior vice president at Carnegie Investment Counsel. "Maybe you have a large carryover loss from a sale of a business or some other loss that you can write off and reduce your income, and maybe that makes it a good opportunity for a Roth conversion."
Other opportunities Velazquez cited include pairing a large charitable gift with a Roth conversion to temporarily lower income for 2026, or taking advantage of a lower income time if clients have deferred income or pensions starting a few years after they retire.
Looking at the potential impact years down the road is also important.
"It's not just the tax arbitrage," Velazquez said. "It's not just the potential stealth taxes, but it's also a longevity issue: How long will the Roth compound after that conversion?"
During the first few years after paying the tax bill associated with a Roth conversion, clients may feel worse off than if they had left the assets in a traditional IRA, he said.
However, the funds grow tax-free in the Roth IRA, potentially decreasing taxes over a client's lifetime, he added.
Clients might find it "unthinkable" to pay taxes sooner than they have to, but it could be "a very useful and beneficial tool" depending on a client's circumstances, Velazquez said. Advisors should also work with clients' tax professionals on conversions, he added.
The 2025 tax law's deduction and other changes have created space to make Roth conversions more tax efficient, according to Bradford Houchins, a senior vice president at Camp Hill, Pennsylvania-based River Wealth Advisors.
"It has allowed both high income earners and low income earners, or people in retirement, actually, to be able to do it more efficiently now," he said, "because there was the increase to the standard deduction; there was the increase for the senior enhanced deduction; and for 2026, there is a deduction for up to $1,000 per person for cash charitable donations."
Clients who have gap years between retiring and claiming Social Security benefits can do Roth IRA conversions while paying less in taxes, he added.
Reducing required minimum distributions and other reasons to convert
For Kelli Smith, financial planner at Edelman Financial Engines, there are three reasons to do a Roth conversion: limiting required minimum distributions (RMDs), creating tax-free savings to pay for long-term care and leaving tax-free money to heirs.
Roth conversions can reduce future RMDs, which start at age 70½ to 75, depending on birth year.
For clients whose retirement income needs are already covered by pensions and Social Security, Smith said the years before those required distributions can provide a window to convert assets to a Roth IRA and further reduce future withdrawals. Roth conversions do not satisfy RMDs, she added.
RMDs are "really starting to bite a lot of people that have been good savers that aren't drawing down their IRAs," said James Mahaney, founder and principal at Georgetown, South Carolina-based Mavericus Retirement Services. Larger mandatory RMDs will force savers into higher tax brackets, meaning they could limit the tax hit by doing Roth conversions in advance, he added.
Estate planning considerations
Beyond managing clients' own tax bills and RMDs, advisors may also look to Roth conversions as an estate-planning tool because heirs can generally inherit Roth assets without owing income taxes on distributions.
If the advisor can learn about a client's goals and heirs' tax situations, that can add more value for the client's tax and estate planning.
"Is their true goal to just reduce their taxes for themselves in their lifetime, or is their true goal to be able to pass this on to the next generation and reduce the taxes that the next generation is going to pay?" Houchins asked. "Even if taxes go down, most people who are inheriting this type of money are already at their prime earning years and will have to add on even more money onto their income, which is going to increase their taxes to probably a level that is significantly above what their parents were paying on these distributions."
For example, an 80- to 85-year-old decedent probably has children in their late 50s or early 60s, close to retirement, and inheriting can raise their tax burden, he added.
"We do, hopefully, get the ability to bring that next generation in to talk about what the process is going to be — what it's going to look like — when their parents pass away," Houchins added.
Impact of increased SALT deduction
The temporary increase in the state and local tax (SALT) deduction from 2026 to 2029 can make Roth conversions more advantageous for some taxpayers.
"It's case by case, but for the cases where it matters, it makes it significantly more beneficial because they can take significantly more income and not pay as much in taxes because they're itemizing their tax return out," Houchins said.
Smith said the increased SALT deduction has helped some of her clients who used to take the standard deduction but now can itemize.
"It gives them … a little bit more wiggle room to be able to do Roth conversions," she said. "We try to couple that with a gifting strategy or a giving strategy."
