Do Roth Conversions Count Towards MAGI?

A Roth conversion is simply moving money from a pre-tax retirement account - traditional IRA, 401(k), 403(b), or another qualified retirement plan - into a Roth IRA. The converted amount is taxable in the tax year of conversion.

Here's how that flows through your return:

• The taxable portion of a Roth conversion is reported on Form 1040 as ordinary income. IRS Form 8606 documents the conversion details and calculates any nontaxable basis.

• This amount increases your adjusted gross income in that year. Roth conversions increase your taxable income for the year - sometimes dramatically.

• Higher AGI then flows into whichever MAGI formulas apply to your filing status and situation.

One point that trips people up: Roth conversions do not count as earned income. You cannot use Roth conversion income to justify Roth IRA contributions. Earned income - wages, self-employment income - is required. Conversion income is taxable, but it's a different category.

Careful planning can mitigate tax impact when executing a Roth conversion. Use tax software or work with a tax professional to model how a specific conversion - say $50,000 versus $200,000 in 2026 - changes your AGI, tax bracket, and downstream thresholds. At Revolutionary Wealth, we routinely build multi-year tax projections for clients showing side-by-side impacts of different conversion amounts before anyone signs a single form.

This is the surprising carve-out most investors miss. The MAGI used for Roth IRA income limits has its own special formula - and it works in your favor.

Per IRS Publication 590-A, the Roth contribution formula works like this:

• Start with your adjusted gross income.

• Add back certain deductions like IRA deductions, student loan interest, the foreign housing deduction, and foreign earned income exclusion.

• Subtract taxable Roth conversion amounts and rollovers from qualified plans to Roth IRAs.

That subtraction is everything. Roth conversion income is excluded from eligibility calculations for direct Roth IRA contributions.

Take the same married couple from earlier - both in their early 60s, $100,000 of earned and investment income, plus a $200,000 Roth conversion. Their AGI sits around $300,000. But for Roth contribution eligibility, you subtract the $200,000 conversion. Their Roth contribution MAGI falls to roughly $100,000. Since Roth IRA contributions for married couples filing jointly phase out between $242,000 and $252,000 MAGI (2026 figures), they're well under the threshold and can make full contributions.

For single filers, full contributions are allowed below about $153,000 MAGI, phasing out to zero around $168,000.

This rule is powerful for retirees who still have some earned income - consulting, part-time work, board seats - and want to keep building tax free Roth IRA balances while also running a Roth conversion strategy for high earners.

Outside the narrow Roth contribution eligibility test, Roth conversions almost always increase MAGI. And those increases have real costs.

• Medicare IRMAA: Roth conversions can trigger higher Medicare premiums due to IRMAA. Medicare uses your MAGI from two years earlier to determine premium surcharges. A conversion at age 63 hits your Medicare premiums at age 65. The income thresholds for married filing jointly start at $218,000 for 2026 premiums, with surcharges climbing at each tier - and these are cliff effects, not gradual. Even $1 over triggers the full surcharge. Revolutionary Wealth's separate article on IRMAA risks and Roth conversions covers this in depth.

• 3.8% Net Investment Income Tax (NIIT): Married couples face a 3.8% tax over $250,000 MAGI ($200,000 single). The 3.8% net investment income tax applies to high MAGI levels, and Roth conversion income can push you above those income thresholds, making your net investment income - capital gains, dividends, rental income - subject to the surtax.

• ACA Health Insurance Subsidies: Higher MAGI due to a Roth conversion can reduce or eliminate ACA health insurance subsidies. For pre-Medicare retirees relying on marketplace coverage, this directly raises out-of-pocket premium costs through lost premium tax credits.

• Education-Related Benefits: Families with college age children may see FAFSA or institutional aid formulas pick up the higher income from conversions, reducing financial aid eligibility and need-based awards.

Revolutionary Wealth helps clients navigate which MAGI rules apply in a given year so they don't get blindsided by higher taxes, lost benefits, or inflated medicare premiums.

Two things determine whether you can make direct Roth IRA contributions:

• Your earned income (wages, self-employment, etc.).

• Your Roth IRA MAGI (using the special conversion carve-out discussed above).

Roth conversions do not count as earned income - so they can't replace wages for IRA contribution purposes. But they also do not hurt Roth contribution eligibility in the way most people assume, because MAGI for Roth contributions subtracts taxable Roth conversion income.

Practical scenario: A semi-retired consultant earns $25,000 of 1099 income at age 64 and converts $150,000 from a traditional IRA to a Roth IRA. Their earned income qualifies them to contribute to a Roth IRA (up to $8,600 if age 50+ in 2026, or $7,500 otherwise). The conversion does not push them past the Roth IRA income limits because it's subtracted from that specific MAGI test. They can do both - contribute to a Roth and convert - in the same year.

At Revolutionary Wealth, we often help clients layer both moves simultaneously:

• Annual Roth IRA contributions funded by earned income.

• Strategic Roth conversions from larger IRAs or old 401(k)s.

This dual approach accelerates the shift from taxable retirement savings to tax free income in retirement.

"Roth rescue" is Revolutionary Wealth's strategic approach to using Roth conversions to rescue retirement savings from future higher tax rates, ballooning required minimum distributions, and avoidable Medicare premiums - even when that means intentionally raising MAGI for a few years.

The core objectives of a Roth rescue plan:

• Reduce future required minimum distributions from pre-tax IRAs and 401(k)s. A Roth conversion can help reduce future required minimum distributions, and RMDs from Roth accounts are eliminated starting January 1, 2024.

• Lower overall taxable income and Medicare IRMAA exposure in your 70s and 80s.

• Create a pool of tax free Roth IRA assets that support flexible retirement spending, qualified withdrawals, and legacy goals.

Here's how it typically works for a Revolutionary Wealth client (age 59–67):

• Identify the tax window: There's often a 5–10 year gap between retirement and RMD age when taxable income is temporarily in a lower tax bracket.

• Ladder partial conversions: Fill up target brackets each year - for example, staying under the top of the 22% or 24% bracket. Spreading conversions across multiple years can be a beneficial strategy to minimize tax impacts.

• Coordinate with life events: Time conversions around selling a business, starting Social Security, or beginning pension payments.

The emotional hurdle is real. Clients focus on the immediate tax hit and MAGI spike. But using taxable assets - a taxable account or cash reserves - to pay income tax on conversion taxes maximizes tax free growth inside the Roth account. For high-balance IRA owners, a well-designed Roth rescue can reduce total lifetime taxes by hundreds of thousands of dollars.

This is highly individualized work. Revolutionary Wealth's planning process uses detailed cash-flow and tax modeling tools through the Lion Street network to design and monitor these multi-year strategies.

The North American Secure Horizon Accelerator is a fixed indexed annuity that Revolutionary Wealth uses in certain Roth conversion and Roth rescue strategies. Its current design includes a 20% bonus credit to the benefit base at issue, index-linked growth potential, and principal protection against market downturns.

Here's how this product fits a Roth conversion context:

• Clients convert funds from an IRA to a Roth IRA, paying the conversion taxes with outside assets.

• Then allocate Roth assets into the Secure Horizon Accelerator, potentially receiving a 20% bonus credit to the benefit base - enhancing long-term income potential within the Roth.

Compare this with managing RMDs from traditional IRAs and variable annuities: traditional IRAs and many annuities force taxable IRA distributions after RMD age. Strategically converting and housing assets in appropriate Roth-based options can reduce or eliminate future RMD headaches.

The Secure Horizon Accelerator is not a fit for everyone. But for clients concerned about outliving their money and wanting a structured income layer inside a Roth IRA, the bonus and design can amplify the tax benefits of a well-timed conversion. Growth and distributions from the Roth-based annuity structure are intended to be tax free if Roth rules are met - meaning tax free withdrawals for life.

For a deeper look at this annuity's mechanics and Roth conversion benefits, read Revolutionary Wealth's detailed article on the North American Accelerator Annuity. And always book a call before making any annuity or conversion decisions.

Roth conversions are a powerful tax-rescue tool. They can also temporarily raise costs if not timed properly.

Medicare premiums (IRMAA): Roth conversions can potentially trigger Medicare IRMAA surcharges based on MAGI. IRMAA uses a two-year MAGI lookback, so a large Roth conversion at age 63 directly affects your medicare premiums at age 65. Revolutionary Wealth sequences conversions before IRMAA-sensitive years or manages conversion size to avoid jumping into the next tier when that's a priority.

3.8% Net Investment Income Tax: Net investment income tax can apply if MAGI exceeds certain thresholds after a conversion. A Roth conversion can push you past the line on capital gains, dividends, and other investment income you wouldn't otherwise owe the surtax on. But long-term, a Roth rescue plan can reduce future NIIT exposure by shrinking the taxable investment income you need to draw in retirement.

Families with college age children: Conversion income shows up on FAFSA and some institutional aid formulas, making financial aid less generous. Strategies include:

• Delaying large Roth conversions until the last FAFSA is filed.

• Doing smaller "test" conversions during years with less aid sensitivity.

• Coordinating conversions with known tuition funding sources like 529 plans or cash reserves.

Higher MAGI can lead to increased Social Security taxation as well. Roth conversion income raises provisional income, which can push the taxable portion of your social security benefits up to the current 85% cap. Revolutionary Wealth's planning integrates income tax, state income taxes, Medicare rules, social security taxation, and education funding so clients aren't surprised by second-order effects.

Most advisory firms treat Roth conversions as an afterthought - a one-paragraph note in an annual review. Revolutionary Wealth built its practice around this work.

Key elements of our process:

• Advanced tax modeling: Multi-year projections showing AGI, various MAGI definitions, tax brackets, IRMAA brackets, and RMDs - with and without conversions. We calculate MAGI across every relevant formula, not just one.

• Roth rescue roadmap: A year-by-year conversion plan (for example, ages 60–72) that coordinates with retirement dates, Social Security, business exits, and spouse income. Every roadmap accounts for filing status, certain deductions, tax exempt interest, and pension payments.

• Product integration: When appropriate, layering in tools like the North American Secure Horizon Accelerator to create tax free income floors inside the Roth from other retirement accounts.

We serve a specific client profile best:

• Pre-retirees and retirees (roughly 59–67) with substantial pre-tax retirement account balances.

• High-income business owners (earning $500,000+) needing coordinated personal and business tax planning.

• Single, divorced, or widowed women looking for clear, confident guidance around complex retirement planning choices.

Revolutionary Wealth is an independent advisory firm, part of the Lion Street network. Roth conversion recommendations are made in the context of comprehensive financial, tax, and estate planning - not product quotas.

Here's what happens when you book a call:

1. Step 1 – Discovery: We gather information on current retirement accounts, income sources, ages (including any college age children), and goals for retirement lifestyle and legacy.

2. Step 2 – Tax & MAGI Mapping: We build a baseline forecast of AGI, multiple MAGIs, projected RMDs, and estimated medicare premiums without any Roth conversions.

3. Step 3 – Roth Conversion Scenarios: We test different conversion sizes and timing - $50,000 per year versus a one-time $400,000 conversion, for example - and show how they change taxes, MAGI, income thresholds, and long-term wealth.

4. Step 4 – Strategy Selection: Together, we choose a Roth rescue plan that balances near-term conversion taxes with long-term lifetime tax savings and IRMAA management.

5. Step 5 – Implementation & Monitoring: We execute conversions, coordinate with your CPA or tax professional, monitor law changes (like the scheduled sunset of current tax brackets), and adjust annually.

You don't need to memorize every MAGI formula or study every IRS publication. That's what an elite Roth conversion planning firm is for.

Schedule your personalized Roth conversion analysis →

Revolutionary Wealth hears these in client conversations constantly:

"Roth conversions never affect my MAGI." They almost always do. Roth conversions increase your modified adjusted gross income for Medicare, NIIT, ACA, and education planning purposes. The only exception is the Roth IRA contribution MAGI test.

"If I do a large conversion, I can't make Roth contributions that year." For the Roth IRA contribution MAGI test, conversion income is subtracted. If you have earned income and your non-conversion MAGI is below the phase-out, you can still contribute to a Roth IRA even in a year with a massive conversion.

"I should avoid Roth conversions entirely if I'm near Medicare age." Strategic, partial conversions - especially before IRMAA-sensitive years - can lower long-term taxes and reduce later premiums. Avoidance isn't strategy; it's just fear dressed up in caution.

"Roth contributions and Roth conversions are the same thing." They're not. Roth contributions are limited by income limits and require earned income. Roth conversions have no income limit, don't require new earnings, and involve moving existing pre-tax dollars (and paying the tax). They're different tools with different rules. Excess contributions to a Roth can trigger penalties; conversions don't have a cap.

If you recognize yourself in any of these myths, your situation deserves a proper review. Revolutionary Wealth's advisors frequently find missed opportunities where clients had prematurely ruled out Roth strategies.

Roth conversions are powerful. They're not universally optimal. Revolutionary Wealth's role is as much about saying "not yet" as it is about recommending aggressive conversions.

Scenarios where heavy Roth conversions may not be ideal:

• You're in a very high tax bracket today with much lower expected brackets later - for example, a business owner about to significantly downshift income. Converting now means you defer taxes at a low rate and pay taxes at a higher tax bracket. The math doesn't work.

• You're relying entirely on IRA assets with no outside cash to pay conversion taxes. Pulling from the IRA itself to cover the tax hit undermines the strategy, especially before age 59½.

• You have tight Medicare, ACA subsidy, or financial aid constraints in a specific tax year where a large conversion would cause more harm than benefit.

In these cases, Revolutionary Wealth may:

• Recommend smaller test conversions.

• Delay conversions until after a business sale or major life event.

• Focus first on other planning levers - defined benefit or cash balance plans, timing of Social Security, or business exit structuring.

A true elite Roth conversion planner isn't simply "pro-conversion." They're pro-math, pro-modeling, and pro-client-outcome.

Personal analysis is everything. Book a call and let Revolutionary Wealth show you the numbers.