Roth Conversion Calculator for Business Owners 2026

Why business owners are uniquely positioned for Roth conversions

A W-2 employee's taxable income is set by their employer. A business owner's income is the result of decisions: how much salary to take, how much to contribute to retirement plans, whether to defer income into a different year. That flexibility creates Roth conversion windows that employees can't engineer.

The core rule is simple: convert when your current effective conversion rate is lower than your expected future marginal rate. For many business owners, that means acting before retirement income stacks Social Security on top of RMDs — when the combined rate often jumps into 24–32% at exactly the moment they expected "low income."

Three conversion windows unique to business owners

The math: convert now at 22% vs. defer to 28%

Example: single filer, $120,000 taxable income (solidly in the 24% bracket), considering a $50,000 conversion from a solo 401(k) at a 24% effective rate. Growth at 6% for 20 years:

At a 28% future rate, converting wins by ~$6,400. At a future rate of 24% or below, deferring wins. The break-even future rate equals the effective conversion rate today — which the calculator computes for you. The gap widens significantly with more years and higher growth rates.

Interaction with other deductions: three traps to check

QBI deduction phase-out (§ 199A): Roth conversion income increases your total income, which can push you above the QBI phase-out threshold of $201,775 (single) / $403,550 (MFJ) for 2026.⁴ For non-SSTBs, the phase-out is gradual. For SSTBs (most services businesses), hitting the threshold begins eroding a 23% deduction. Large conversions near this boundary can effectively cost more than the marginal rate alone suggests — use the QBI optimizer to check your sensitivity before converting.

Medicare IRMAA (2-year lookback): Roth conversion income increases your MAGI, which determines Medicare Part B and Part D premiums two years later. Your 2026 conversion income will affect 2028 premiums. The 2026 IRMAA first cliff is $109,000 (single) / $218,000 (MFJ).³ A conversion that crosses this threshold adds roughly $1,700–$2,000/year per person in Medicare surcharges. For large conversions, factor this into the break-even analysis — the calculator's "future rate" input should effectively be higher to account for it.

ACA premium tax credits: The enhanced ACA subsidies expired December 31, 2025, reinstating the 400% FPL cliff. If you're buying Marketplace coverage while self-employed, Roth conversion income that pushes your MAGI above the cliff eliminates subsidies worth thousands per year. Plan conversion amounts in coordination with your health insurance strategy — see the self-employed health insurance guide.

Roth conversion vs. backdoor Roth: different tools

A Roth conversion moves money that's already in a pre-tax account (traditional IRA, solo 401k, SEP IRA) to Roth. You pay ordinary income tax on the amount converted. A backdoor Roth is a contribution strategy for new money: you contribute to a non-deductible IRA and immediately convert it to Roth, bypassing direct Roth IRA income phase-outs. They're separate tools used simultaneously: backdoor contributions for new money each year, strategic conversions for the existing pre-tax balance built up in a solo 401(k) or SEP IRA over the years.

One important note: if you have a large SEP IRA and want to do backdoor Roth contributions, the pro-rata rule makes the backdoor nearly worthless until you roll the SEP into a solo 401(k) first. See the backdoor Roth guide for the exact math.

When a Roth conversion probably doesn't make sense

• You're in the 32% or 35% bracket now and have a credible path to lower income in retirement (e.g., you're selling the business this year and expect a dramatic drop next year).
• You'd need to raid the Roth itself to pay the conversion tax — the tax bill should be paid from separate taxable funds so the full converted amount compounds tax-free.
• You have a large SEP IRA and are planning to do backdoor Roth contributions — roll to a solo 401(k) first, then evaluate conversion separately.
• ACA income-cliff math shows the premium subsidy loss exceeds the long-run bracket advantage.

1. IRS Rev. Proc. 2025-32 — 2026 inflation adjustments: tax brackets ($12,400/$50,400/$105,700/$201,775 single; $24,800/$100,800/$211,400/$403,550 MFJ) and standard deduction ($16,100 single, $32,200 MFJ)
2. Tax Foundation — 2026 Federal Tax Brackets and Rates
3. CMS — 2026 Medicare Part B Premiums and Deductibles: IRMAA first cliff $109,000 single / $218,000 MFJ (based on 2024 MAGI); Part B base premium $202.90/month
4. IRS — One Big Beautiful Bill Act (July 2025): § 199A QBI deduction made permanent at 23%; phase-out thresholds per IRS Notice 2025-67

Tax bracket values verified against IRS Rev. Proc. 2025-32 and Tax Foundation, May 2026. QBI phase-out thresholds per IRS Notice 2025-67. IRMAA thresholds per CMS 2026 fact sheet.

Get matched with a Roth conversion specialist

The break-even math is calculable. The hard part is modeling your future income trajectory well enough to make the decision confidently — especially if a business sale, exit, or semi-retirement is in the picture. A fee-only advisor who works with business owners can run multi-year Roth conversion ladders, account for ACA and IRMAA cliffs, and coordinate with your CPA on the QBI interaction. Most of this planning pays for itself in the first year.