Roth Conversion to the 22% Bracket Top: $206K Limit (MFJ)

The decision: Robert and Dana, $120,000 taxable, Pennsylvania

Robert is 62 and Dana is 61. They file jointly. Robert draws a $58,000 pension; Dana earns about $34,000 in part-time consulting; together with interest and dividends, their taxable income for 2026 lands at $120,000 after the $31,500 MFJ standard deduction. They have $940,000 sitting in a traditional 401(k) and a rollover IRA. Neither has claimed Social Security yet. They want to convert into a Roth this year — the question is exactly how much.

The answer is $86,700. Their 22% bracket ceiling is $206,700 of taxable income (2026, MFJ). They are at $120,000. The gap — $206,700 − $120,000 — is $86,700. Convert that, and every converted dollar is taxed at 22%. Convert $90,000 instead, and the last $3,300 jumps to 24%. The bracket is the easy math. The trap is that their resulting MAGI lands them in an IRMAA tier two years out, which they will not feel until 2028 Medicare premiums.

Where the 22% bracket ends (IRC §1, Rev. Proc. 2025-32)

Federal brackets are marginal: only the dollars inside each band pay that band’s rate. For married-filing-jointly in 2026, the relevant bands are:

The line that matters is $206,700. That is the last dollar taxed at 22%. The very next dollar — $206,701 — is taxed at 24%. There is no rounding grace; the IRS computes this on your Form 1040 taxable-income figure, line 15.

The headroom formula

Bracket-fill is one subtraction. The order of operations:

1. Project taxable income before any conversion. Add pension, wages, taxable interest, dividends, capital gains, and the taxable portion of Social Security, then subtract the $31,500 standard deduction (or itemized total). For Robert and Dana: $120,000.
2. Find your ceiling. The MFJ 22% top is $206,700 for 2026.
3. Subtract. $206,700 − $120,000 = $86,700 of headroom.
4. Convert that exact amount — not a round number. Converting $87,000 would push $300 into 24%. Converting $86,700 lands you on the line.

Do this in Q4. By October or November you can see nearly the entire year’s income, and a year-end conversion can be sized to within a few hundred dollars of the ceiling. The conversion deadline is December 31 of the tax year — not April 15 (IRC §408A; that April deadline is for contributions, not conversions). And under TCJA, recharacterization is gone: once you convert, you cannot undo it, so do not overshoot.

The tax on the conversion

All $86,700 sits inside the 22% band, so the federal cost is a flat 22% — $19,074. Pennsylvania taxes retirement-account conversions for those under 59½ differently, but for a couple over 59½ the conversion is generally not taxed by PA at all; we show the flat 3.07% only to illustrate that high-tax states change the calculus. Pay the tax from a taxable brokerage account, not from the converted funds — paying from the IRA shrinks the Roth and, before 59½, triggers a 10% penalty on the withheld amount.

What most people miss: the IRMAA cliff sitting next to the bracket

This is the section that changes the decision. The 22% bracket ceiling is $206,700 of taxable income. The first IRMAA surcharge tier for MFJ starts at $206,000 of MAGI — a near-identical number, but MAGI is gross, before the standard deduction. So Robert and Dana’s MAGI after a full 22% fill is roughly $238,000 ($206,700 taxable + $31,500 standard deduction). That does not just cross the first IRMAA tier — it lands them in the second tier.

IRMAA uses a two-year lookback (2024 income sets 2026 premiums), so this only bites once both spouses are on Medicare. The 2026 MFJ surcharge schedule:

At $238,000 MAGI both spouses move from $185 to $259 Part B plus a $13.70 Part D surcharge — about $87.70/month each, or roughly $1,052 per spouse for the year, $2,105 for the couple. That is a real cost the bracket math alone never shows. For a couple already on Medicare, the “true” cost of the $86,700 conversion is the $19,074 federal tax plus that IRMAA surcharge two years later (CMS sets the 2026 tiers off 2024 MAGI).

When to fill 22% anyway — and when to stop short

Fill the 22% bracket when your future forced income will be taxed higher than 22%. The classic case: a large pre-tax balance that triggers RMDs at age 73 or 75 (SECURE 2.0 §107 — age 73 for those born 1951–1959, age 75 for 1960 and later). Robert and Dana’s $940,000 grows for another decade before RMDs begin; at a 26.5 divisor (IRS Pub. 590-B Uniform Lifetime Table at 73), a $1.5M balance forces about $56,600 of income on top of their pension and Social Security — pushing them into 24% involuntarily. Converting at 22% now to avoid 24% later is a genuine win.

Stop short of 22% when:

• Your future RMD bracket is 12% or 22%. Paying 22% today to save 22% (or 12%) tomorrow loses money once you account for the IRMAA surcharge and lost tax-deferred growth on the dollars used to pay the tax.
• You are already on Medicare and the IRMAA tier jump exceeds the bracket savings. Sometimes filling only to the $206,000 MAGI line (well short of the 22% taxable ceiling) is the smarter target.
• One spouse may be widowed soon. The survivor files single, where the 22% bracket ends at just $103,350 — converting aggressively while both are alive front-loads tax at the favorable joint brackets, which can argue for filling 22% or higher while the joint window is open.

The multi-year view: one fill is not the plan

A single $86,700 conversion barely dents a $940,000 pre-tax balance. The point of bracket-fill is to repeat it every year of the gap window — the years after retirement and before RMDs and Social Security force income up. Robert and Dana have roughly an 11-year runway (ages 62 to 73). If they fill the 22% bracket each year, they move a meaningful slice out of pre-tax before the RMD clock starts.

Before age 65, neither spouse is on Medicare, so IRMAA is irrelevant — fill the full 22% bracket in those years and move the maximum. From age 63 onward (because of the two-year lookback), the IRMAA line becomes the real ceiling, and the smarter target shifts to the $206,000 MAGI line. The plan is not one number; it is a different number each year as the constraints turn on.

Execution: the order that keeps you on the line

Sizing a conversion to land within a few hundred dollars of $206,700 is a process, not a guess:

1. Wait until October or November. By Q4 your pension, wages, and most dividends are known. The conversion deadline is December 31 (IRC §408A), so you have a tight, well-informed window.
2. Re-project taxable income. Recompute gross income minus the $31,500 standard deduction. If a year-end mutual fund capital-gains distribution is coming, subtract its estimate too — it eats your headroom.
3. Subtract from $206,700. That is your conversion ceiling. Convert slightly under it (say, $86,000 instead of $86,700) to leave a buffer against a December surprise distribution.
4. Convert in-kind if you can. Moving shares rather than selling and rebuying keeps you invested through the transfer; the dollar value on the conversion date sets the taxable amount.
5. Pay the tax from outside the IRA. Use taxable-brokerage cash for the $19,000-ish federal bill. Withholding it from the conversion shrinks the Roth and, under 59½, adds a 10% penalty on the withheld dollars.

Recharacterization was eliminated by TCJA, so there is no undo button. A conversion that overshoots into 24% — or worse, into a higher IRMAA tier — is permanent for that year. Precision in step 3 is the whole game.

Social Security interaction

A conversion raises combined income (AGI + tax-exempt interest + half of benefits). Above $44,000 combined income (MFJ), up to 85% of Social Security becomes taxable — and those thresholds, set in 1983, are not inflation-indexed. The planning insight: Robert and Dana have not claimed Social Security yet. These “gap years” between retirement and claiming are the cleanest time to convert, because there is no benefit being dragged into taxation. Once they claim, every conversion dollar also pulls more of their benefit into the 85% zone. Convert hard in the gap; convert carefully after.

The decision lever

Your conversion size is one subtraction — $206,700 minus your projected taxable income — done in Q4 so the number is precise. But the binding constraint is rarely the 2-point jump from 22% to 24%. It is the IRMAA tier sitting at $206,000 MFJ MAGI, two years downstream. Run both numbers before you convert: the marginal rate on the converted dollars, and the Medicare surcharge those same dollars trigger when you turn 65. If your forced RMDs will land you in 24% regardless, fill the 22% bracket now and accept the IRMAA cost. If they won’t, target the lower of the two ceilings — the $206,000 MAGI line, not the $206,700 taxable line — and keep your premiums flat.