Why 2026 is the “Golden Year” for Roth Conversions
This year, 2026, brings a series of changes to the laws that you should know about to take the best advantage of them, especially if you are thinking of retiring soon or are already retired.
As you well know, our financial planning firm is located in Boca Raton, in wonderful Palm Beach County, and day by day, as I drive around, I wonder how many of the retirees know about the changes the new One Big Beautiful Bill Act will bring in 2026.
That is why it occurred to me to make a brief list of some of the tax planning issues that I consider you should know, without trying to give any type of tax or personalized advice, but rather so that you can talk with your Certified Financial Planner, and as we have always said, it is a Fee-Only service.
Well, without further ado, let’s start with our list by listing the 5 most essential aspects that you should know to master the 2026 retirement Tax Landscape:
1.- Catch-Up Contributions and the ROTH Mandate
Usually in our work as an hourly financial planner with my clients I am always very interested in knowing what kind of contributions they are giving to their 401K and I can tell you that a large part of my clients are those who have been maximizing their contributions and by 2026 they will contribute about $24,500 and of course they will want to give their extra chat-up contribution that the IRS allows for those who are over 50 years old, which is of about $8,000, which brings his annual contribution to about $32,500.
For those who are in tax bracket above 24% I have usually suggested that this catch-up contribution be given in the Traditional way, since if they are if their tax bracket is 32% they could save about $2,560 (8,000 * 32%) in taxes or instead of saving we can say that they can postpone the payment of this tax.
Now, this suggestion could change by 2026 for those who earned more than $150,000 in 2025, because the new rules require a catch-up contribution to a ROTH account.
This means, in simpler English, you will be able to make that catch-up contribution, but you will not be able to deduct it from your taxes, and that amount will go into a ROTH 401(k) account.
Which, on the one hand, is bad because you will not be able to reduce those taxes, but on the other hand, it is what it is, and on the other hand, good because it encourages you to save tax-free for your retirement or a ROTH.
2. The new deduction called the Senior Bonus Deduction
I think this is one of the deductions that I like the most. Those over 65 can each receive a deduction of about $6,000, and if they file their taxes as a couple, they can reduce their income by about $12,000.
This deduction is in addition to your standard deduction, so by 2026, the bill would be as follows for those who are over 65 and file their taxes as a couple:
To your standard deduction of $32,200, you add $1,650 for each of you, and on top of that, you add about $6,000 for each of you, which leads to this number going up to $47,500, which opens the door to interesting strategies such as a ROTH Conversion to lower your RMDs in the future.
Now, in this case you have to be very careful if you are going to implement a ROTH Conversion strategy this year, because as we see in principle, it will help you reduce your taxes if you go over the amount to be converted and your taxable income in the case of a couple exceeds $150,000, this deduction will begin to be reduced and if you exceed $250,000 you will not receive anything for this deduction.
For individuals who file their taxes, they should be careful not to exceed $75,000, and if they already exceed $175,000, they lose the full deduction.
That is why we always suggest that for this type of ROTH Conversion strategies you are supported by a CFP, who is Fee-Only and who works by the hour, so that they can take all these considerations into account and evaluate running sophisticated simulations that suit you best.
3.- A new floor for your Charitable Giving
2025 was the last year when it was relatively easy to optimize your itemized deductions because, for those customers who are charitable inclined, they could contribute the amount they wanted, and from the first dollar, it counted toward the total they needed to itemize.
Now, from 2026, a floor is created from which what you give at the beginning is as if you had not given anything.
Let me explain better: the rule says that Charitable contributions are now deductible only to the extent they exceed 0.5% of your Adjusted Gross Income (AGI).
So if a client has an AGI of $200,000, 0.5% of that amount would be about $1000. If they wanted to donate about $4000, the first $1000 is not be taken into account, and the amount that would be taken at the tax level would be $3000.
And it gets a little worse for customers in the 37% tax bracket; before that, $3000 would have reduced their taxes by 37% as well. From now on, the maximum amount you can use for this calculation will be 35%.
Now, for our friends who are already retired and have their retirement plans in an IRA, remember that an excellent option we here in Boca Raton, in Palm Beach, always suggest to our clients is to forget about QCDs.
Qualified Charitable Distributions (QCDs) from an IRA are not subject to the 0.5% floor OR the 35% cap, which is a significant advantage. They are excluded from income entirely, making them the “gold standard” for giving if you are over 701/2.
4.- The SALT that we were all in, the power of itemized deductions
Previously, if you had paid more than $10,000 in property taxes, which are quite high in Florida, California, and New York, you would only be able to deduct $10,000.
Now, in 2026, this limit was updated, and you will be able to reach up to $40,400. As with all good things with the IRS, there are always income limits you must take into consideration.
If in 2026 your MAGI – Modified Adjusted Gross Income, when you file your taxes as a couple, is less than $606,333, you will be able to use this new maximum if you itemize the deductions from your taxes. Similarly, if you file your taxes individually, your MAGI must be below $505,000.
If you’re wondering what happens if you earn more than that, first, congratulations on your good income, but this deduction will start to “phase down” at a rate of 30% for every dollar over the limit. You can always deduct the maximum of $10,000 if the amount you produce is much higher.
This deduction from the SALT will be temporary, after 2029 or from 2030 we return to the maximum amount of $10,000, which means that a special window opens to make your ROTH Conversions and as always our suggestion is that you do not try to run these numbers in a simple Excel sheet because there are many parts that move and you must take into consideration with a Fee-Only Financial Planner.
5.- The super Gift and Estate Tax lifetime exemption
Unlike other countries where people may be very concerned about leaving a legacy or inheritance to their beneficiaries but know that the government will keep a large part of their money, this is no longer a concern for the vast majority of Americans.
I don’t know how many articles I read and how many forums I attended before the OBBBA came out, where all the specialists said to be very careful because from 2026 the sunset tax will occur and the tax exemption from estate taxes was going to drop again to $7 million from the almost $13.99 million that was there, which could put a group of families in trouble.
The good news is that the new rule establishes that this amount will not go down and that by 2026, each person will have about $15 million of quota to leave assets, retirement plans, and portfolios to their beneficiaries without having to pay estate taxes. The best thing is that if the assets belonged to a couple, the amount rises to $30 million, since it is $ 15 per person.
This change again opens up an opportunity for couples who want to also leave their active beneficiaries from having to pay taxes by leaving them in ROTH accounts instead of tax-deferred accounts, such as a 401K or a Traditional IRA.
Why 2026 is the “Year of the Roth Conversion”
Throughout this blog, we have been explaining the reasons why we, as Fee-only Financial Planners from Palm Beach, feel that the whole country should do a review of their finances, especially those who are already retired or those who are about to retire and are in a more beneficial tax bracket for a ROTH Conversion strategy.
If you want to talk more about these strategies, we invite you to request a free appointment so you can learn about our hourly services, provided in a 100% Fiduciary way, always putting your interests first.
