Aug 4, 2025
If you were planning a Roth conversion maneuver this year, the newly-introduced One Big Beautiful Bill (OBBB) doesn’t directly impact the strategy.
However, it does have an indirect impact that could make this popular maneuver more or less attractive, depending on your age and income.
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Here’s a closer look at how this sweeping new tax bill could change your approach to a Roth conversion this year.
New senior deduction
For seniors across the country, perhaps the most noteworthy aspect of the new bill is the additional deduction for this demographic. Taxpayers who are 65 or older can now claim an additional $6,000 as a tax deduction above their standard deduction, effectively reducing their tax liability.
This senior deduction is per filer, so a couple filing together can get up to $12,000 in additional deductions because of the new tax act.
Not only does this save money, it could also give you additional room to deploy a Roth conversion. Since the maneuver involves moving money from a traditional IRA to a Roth IRA, you must pay taxes on the money during conversion. With the new seniors deduction, you have a wider tax-free window to boost the amount of money you convert.
Effectively, the seniors deduction makes a Roth conversion more attractive. However, there are limitations on the deduction that could make this move less attractive for some depending on their income and time horizons.
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Income thresholds and time limits
The seniors deduction is attractive, but it’s not permanent and it’s not for everyone.
The full deduction is only applicable for those who earn $75,000 or less individually or $150,000 or less as a couple. Beyond those thresholds, the deduction amount is gradually phased out. The deduction is fully phased out at $175,000 for individuals and $250,000 for couples.
If you’re attempting a Roth conversion, any cash converted between accounts is regarded as regular income and could potentially push your adjusted gross income (AGI) over these thresholds.
If you earn a relatively high income and are looking to convert a large amount, you could even eliminate the senior deduction completely, missing out on valuable tax savings.
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For example, say a married couple earns $140,000. They may be eyeing a $20,000 Roth conversion. But that move would push their AGI to $160,000, placing them beyond the $150,000 threshold and phasing out part or all of their $12,000 senior deduction.
That means the effective cost of converting to a Roth could be higher than expected — not only because of the added taxable income, but also because you’d lose a valuable deduction in the process.
One way to preserve some of the deduction is to spread out your Roth conversion over multiple years. So instead of converting $20,000 this year, you can convert $7,000 every year for the next three years.
However, the senior deduction is only available for tax years 2025 through 2028, which means you have a limited window to maximize tax savings while converting to a Roth account.
The bottom line
For many seniors, the new deduction is a welcome tax break. For some, it could even make the Roth conversion more attractive.
However, the true impact on your tax bill will depend on your age, financial situation and income.
If you’re considering this maneuver in 2025 or beyond, reach out to a financial adviser to help you create a robust plan that maximizes your savings over the long term.
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
