Roth Conversions After the 2025 One Big Beautiful Bill Act
Alan Hensley, CFP®
From the Desk of Alan Hensley, CFP® | The 2025 tax bill introduces significant new considerations for Roth conversions, particularly around the newly created Senior Deduction and a revamped SALT (State and Local Tax) deduction. While Roth conversions remain a popular strategy for reducing long-term tax liability, it’s important to now account for how these new rules could unintentionally increase a taxable income—sometimes dramatically. For instance, taxpayers over 65 can claim a $6,000 deduction (or $12,000 per couple), but this begins to phase out at $150,000 of modified adjusted gross income (MAGI). A Roth conversion that pushes a retiree above that threshold could not only trigger higher income taxes but also eliminate the Senior Deduction, effectively adding an unexpected tax penalty.
Also, the new $40,000 SALT deduction comes with its own complications. Taxpayers with MAGI over $500,000 face a 30% phaseout, which can drastically reduce the deduction. For high-income couples, a Roth conversion that lifts them into this range can lead to a disproportionately higher tax bill.
In short, while Roth conversions remain a powerful tax-planning tool, the 2025 changes make timing and income thresholds more critical than ever. When thinking about the new rules, be sure to now run detailed projections to navigate the senior and SALT deduction traps and to ensure that conversions remain a net benefit rather than an unexpected burden. If you haven’t ran a projection with your Wealth Advisor recently, it may be beneficial to consider reaching out to revisit this topic.