Roth Conversion Strategies in the OBBBA Era

The One Big Beautiful Bill Act (OBBBA) did not directly alter retirement account rules. There are no new Roth contribution limits, no changes to conversions, and no new IRA rules. However, the law made sweeping changes to the individual tax code, including permanent rate extensions, higher deductions, and new income-based thresholds, that significantly affect how advisors should approach Roth conversion strategies.

In short: The Roth landscape itself hasn’t changed, but the tax soil beneath it has. That makes this a critical moment to revisit client communications, disclosures, and multi-year planning models.

1. Make sure to update disclosures

Advisors should revise client communications and disclosures to reflect OBBBA’s provisions, especially the permanent extension of favorable tax brackets, the increased standard deduction, enhanced State and Local Tax (SALT) deduction limits, the Qualified Business Income (QBI) deduction, and new deductions (like the new Enhanced Senior Deduction, and the deduction on tips and overtime).

The array of phaseouts for these deductions vary greatly, presenting a risk to the client which must be considered and brought to their attention. For example, the expanded SALT deduction, which can increase a taxpayer’s SALT deduction from $10,000 to $40,000 under the OBBBA, begins phasing out at $500,000 of Modified Adjusted Gross Income (MAGI) and is fully phased out when MAGI exceeds $600,000. For clients in or around this range, incurring income from IRA distributions or Roth conversions can quickly erode this deduction.

Consider a joint filer with a $500,000 MAGI that places them in the 35% Marginal Tax Bracket. Performing a $100,000 Roth conversion fully phases them out of the expanded SALT deduction, resulting in an effective tax rate of about 43%, even while their marginal rate is 35%. This is because they are increasing income while reducing their deduction. This illustrates how seemingly straightforward conversions can have unintended consequences if deduction phaseouts are not modeled.

These updates are not just compliance housekeeping. They help set client expectations. When clients understand how the new tax backdrop influences Roth conversion opportunities, they’re less likely to perceive conversion-year tax bills as surprises and more likely to see them as part of a deliberate strategy.

Here is how we updated our disclosures at Carson:

Regular Tax Planning Disclosure: “None of the information contained herein is intended as tax or legal advice. Tax laws are complex and subject to change. Please consult the appropriate professional to see how the laws apply to your situation.”

New Special OBBBA Disclosure:

“IMPORTANT TAX PLANNING DISCLOSURE: All tax planning recommendations (including Roth conversions) must be considered in light of the One Big Beautiful Bill Act (OBBBA), passed on July 4, 2025, which made significant changes to the tax code and introduced several new phase-outs and limitations that may reduce or eliminate the benefits of certain strategies. These include the enhanced additional senior deduction of $6,000 per individual (age 65 and over), the increased SALT deduction cap of $40,000, and other income-based thresholds. Please note that the net benefit of any recommendation will depend on your specific circumstances, and projections may change as IRS guidance is released and your income or deductions vary. The analysis may not include your final income numbers for 2025. If there are any discrepancies between your income and the amounts used in this analysis, please inform us as soon as possible. With this, the recommendation could affect your ability to qualify for certain income-related deductions, particularly as noted in the OBBBA. We strongly encourage you to consult with your CPA or tax professional prior to implementation of any tax strategies.”

Pro tip: Don’t just update boilerplate language! Advisors should create a one-page client handout that summarizes the key OBBBA tax changes so they are aware of what they can expect this tax season and beyond.

2. Re-evaluate Roth conversion timing and multi-year strategy

OBBBA creates a unique planning environment by combining permanent tax certainty with temporary enhancement opportunities. With TCJA-era brackets now made permanent, advisors can build Roth conversion strategies under greater certainty that today’s brackets will be tomorrow’s as well.

But layered on top of this permanent foundation are several temporary provisions that create time-limited windows of opportunity. This creates a “best of both worlds” scenario: stable rate structure for long-term planning, plus temporary deduction bonuses that can supercharge conversion strategies for clients who qualify.

The key is coordinating these elements. Long-term conversion strategies can rely on permanent brackets, while near-term tactics should maximize temporary deductions before they expire. That clarity supports structured, multi-year conversion strategies. Instead of accelerating large conversions out of fear of rising rates, advisors can recommend spreading conversions over several years to stay within favorable brackets. This approach can be particularly effective for retirees in their 60s after peak earnings years but before RMDs and Social Security push income higher.

Keep in mind that while these temporary deductions can provide additional opportunity to tax-efficiently expand a Roth conversion recommendation, it may still be the right decision to convert in excess of the income phaseout ranges. The short-term risk of losing these deductions does not always outweigh the long-term benefits of a Roth conversion, especially for those clients with large traditional IRAs that will present their own tax consequences when RMDs begin.

This drives home the importance of ongoing analysis when making Roth conversion recommendations while these new deductions are in place. However, as many of these deductions are set to expire in 2028 and 2029, it may make sense to halt Roth conversions to maximize the deductions in those years, when there is more clarity on the future of the deductions or the likely direction of tax legislation at that time.

Pro tip: Use tax projection software, such as Holistiplan, to map out multi-year conversion scenarios under OBBBA’s permanent brackets. Showing clients how gradual conversions keep them in lower brackets (versus a one-time large conversion) builds confidence in the plan and demonstrates ongoing advisor value.

3. Assess expanded standard deduction & new deductions’ impact on taxable income

OBBBA raises the 2025 standard deduction to $15,750 for single filers and $31,500 for joint filers, with annual inflation adjustments. Seniors get a temporary additional $6,000 deduction (per person) from 2025 through 2028, meaning a married couple over 65 could deduct as much as $12,000 on top of the regular standard deduction.

When you factor in the $40,000 SALT deduction (2025–2029), the restored charitable deduction for non-itemizers ($1,000 for singles / $2,000 for joint filers), the permanently increased Child Tax Credit of $2,200 per child (with phaseouts beginning at $200,000 for individuals and $400,000 for joint filers), plus new deductions for tips and overtime, many clients could see their taxable income meaningfully reduced.

For advisors, this means that more clients will have “room” in lower brackets to convert pre-tax dollars to Roth. And conversion thresholds should be recalculated, since client effective tax rates may shift downward once new deductions are applied.

Example: A married couple, both age 66, has $180,000 of AGI in 2025. Under OBBBA, they receive a $34,700 standard deduction (including the $3,200 additional senior deduction), and a partially phased-out enhanced senior deduction of $8,400 (down from a maximum of $12,000), for a total of $43,100 in deductions. This reduces taxable income to about $136,900 (about $10,000 less than pre-OBBBA rules) creating additional room for Roth conversions, but with the caveat that additional conversions could further shrink their enhanced senior deduction.

Pro tip: Re-run tax estimates for clients who typically take the standard deduction. The senior deduction, SALT cap, charitable write-offs, and other new OBBBA deductions may shift them from “conversion skeptics” to strong candidates once you quantify the after-tax benefit. This may be especially important for clients living in high-income-tax states, who could benefit from the expanded SALT cap.

4. Review income phase-outs & MAGI-based limits

Not all OBBBA deductions are created equal. Several, including the senior deduction and higher SALT cap, phase out at specific Modified Adjusted Gross Income (MAGI) thresholds. The enhanced senior deduction begins phasing out at $75,000 (single) and $150,000 (joint), phasing out entirely at $175,000 and $250,000, respectively. For the expanded SALT cap, the deduction phases out between $500,000 and $600,000 of MAGI, regardless of filing status.

Because Roth conversions increase MAGI, advisors must model carefully. A client who converts too much in a single year may trigger phaseouts that negate the value of deductions they would otherwise enjoy. Failing to account for phaseouts could leave a client worse off than if no conversion had been attempted.

Staged conversions, income smoothing, and coordination with other planning levers (charitable giving, capital gain/loss harvesting, retirement account withdrawals) can help keep MAGI in a favorable range.

Pro tip: Model conversions in $10,000 increments to see exactly where a client crosses a MAGI threshold. Even a small “over-conversion” can cost thousands in lost deductions. Keeping conversions just under phaseout levels often yields the most efficient tax outcome.

Seize these opportunities

While OBBBA made no direct changes to Roth rules, it created a more deduction-rich, rate-stable environment that expands Roth opportunities if advisors adjust strategies accordingly. The real risk now is not that Congress will suddenly raise rates, but that clients may accidentally disqualify themselves from new deductions if conversions are poorly sized or timed.

For advisors, this is both a planning challenge and a chance to demonstrate value. By updating disclosures, revisiting conversion timelines, and modeling the impact of Roth conversions on MAGI thresholds, you can help clients realize the benefits of Roth conversions while maximizing the deductions OBBBA placed on the table.