Roth conversions still shine after tax law changes

Before the One Big Beautiful Bill Act passed in July 2025, Americans planning for intergenerational wealth transfers were uncertain whether relatively low tax rates and historically generous estate and gift tax exemptions might sunset at the end of 2025. The prospect of increased tax implications prompted many to consider mitigation strategies.

Then, the One Big Beautiful Bill Act made the more advantageous rates and exemptions “permanent.”

Typical reaction: “Never mind, nothing to mitigate here.”

Yet for many – especially those whose heirs may be in their high-earning years at the time of inheritance – there is still good reason to consider a Roth conversion, which involves paying taxes now to create tax-free income later. A Roth conversion can be relevant to tax, income and wealth transfer strategies.

First, quick definitions:

• A traditional IRA offers tax-deferred growth – contributions are made with pre-tax dollars and taxes are paid when funds are distributed or withdrawn. At a certain age, minimum required distributions (RMDs) must be taken annually.
  A Roth IRA offers tax-free growth – contributions are made with after-tax dollars and withdrawals are tax-free if relatively easy criteria are met. Distributions are not required for the original account owner at any age.
• A Roth conversion involves converting tax-deferred savings, such as in a traditional IRA, to after-tax savings in a Roth IRA, creating the potential for future tax-free growth and income. Taxes on the converted amount, however, are accelerated – the converted amount is taxed as income in the year of the conversion.

How much ‘room’ do you have?

Paying a larger tax bill now may not be advantageous or feasible for everyone, but the passage of the One Big Beautiful Bill Act was a positive development for those looking to convert tax-deferred savings to a Roth IRA.

The law extended comparatively low tax rates, but they are permanent only in that current legislation does not call for them to end at a predetermined date. Future laws can change the tax rates and brackets.

The One Big Beautiful Bill Act also introduced a senior deduction and increased the SALT tax deduction, potential tax-saving opportunities that need to be part of the calculation:

• The senior deduction allows an additional $6,000 deduction for taxpayers age 65 or older for tax years through 2028. The deduction is available whether you itemize or claim the standard deduction. Income limits apply, however, and the deduction begins to phase out at modified adjusted gross income levels of $75,000 for single filers and $150,000 for married couples filing jointly. It phases out completely at $175,000 and $250,000, respectively.
• The state and local tax deduction was increased from $10,000 to $40,000 for 2025 and will adjust higher by 1% each year through 2029. Here, the increased deduction, meaning the amount above the baseline $10,000 deduction, begins to phase out at modified adjusted gross income over $500,000 and phases out completely out at $600,000

If your goal is to preserve the full senior and SALT deductions, you’ll want to be careful not to convert too much of your tax-deferred savings, as the converted amount counts as income in the year of the conversion.

Potential benefits of a Roth conversion

There are several reasons you might consider a Roth conversion for your own income strategy:

• Tax rates in the current year could be lower than expected in future years.
• A mix of taxable and tax-free accounts – and the ability to take strategic distributions from both – could make it easier to adjust to a future tax environment.
• A Roth conversion will result in a smaller traditional IRA, which translates to lower RMDs; Roth IRAs do not have RMDs.
• During times of market volatility, converting while asset values are depressed could result in a lower tax bill for the converted securities. Conversions can be done in-kind, with any potential appreciation due to a market rebound growing tax-free in the Roth IRA.

If preserving family wealth across generations is a primary goal, a Roth conversion has meaningful considerations related to another recent tax law change known as the 10-year rule. Previously, the tax-deferred benefits of a traditional IRA were passed from generation to generation under what was known as the stretch rule: distributions for an inherited IRA became subject to the beneficiary’s life expectancy.

The 10-year rule, which passed as part of the SECURE Act, requires most non-spousal IRA beneficiaries – think, children – to zero out an inherited IRA’s account balance 10 years after the original account holder’s death. And if the original owner was taking RMDs, the beneficiary must take them annually, as well. The 10-year rule creates more of a tax burden for beneficiaries of a traditional IRA because distributions are taxed as income. If the next-generation beneficiary is in their high-earning years at the time, the tax burden is exacerbated.

In that sense, a Roth conversion can serve as a tax arbitrage between the IRA owner and their intended beneficiary. For example, parents might be in a lower tax bracket during retirement compared to their grown children who are in the workforce.

While most non-spousal beneficiaries who inherit a Roth IRA must also fully distribute the account by the end of the 10th year after the original owner’s death, distributions from a Roth are generally tax-free and beneficiaries can take distributions with no tax consequences. Because there are no RMDs for Roth IRAs, strategically, the beneficiary can hold the inherited Roth IRA for the full 10 years before distributing the account, compounding the power of tax-free growth.

Additional considerations

Roth conversions increase your gross income in the year of conversion, which may affect other taxation, including deductions, credits and related items, such as Medicare premiums or Social Security taxation.

For converted dollars to be distributed without a 10% penalty, the converted funds must be held for at least five years, or the Roth IRA owner must be 59 1/2 or older. A separate five-year period applies for each conversion.

Selling assets from the IRA to pay taxes limits long-term growth potential. Consider paying taxes from an outside source.

If you intend to leave your traditional IRA to a charity, it may not make sense for you to pay additional taxes today on money or assets a tax-exempt charity would not pay.

Bottom line

While converting tax-deferred funds to a Roth IRA can offer significant benefits, it’s important to evaluate the various implications of increasing your income in the year of conversion based on your situation and goals.

Raymond James and its advisors do not offer tax advice. You should discuss any tax matters with the appropriate professional.

Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications. Investors should consult a tax advisor before deciding to do a conversion.

Contributions to a traditional IRA may be tax-deductible depending on the taxpayer’s income, tax-filing status, and other factors. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.

From the Desk of Dale Crossley and Evan Shear | 2026

While periods of political uncertainty and market volatility are nothing new, we know that each season of instability can feel different when you are living through it in real time. We have seen similar moments before, because uncertainty has always been part of the investing landscape. But the pace, tone, and intensity of the last several months have created a level of stress that feels especially personal for many investors. When headlines change by the hour and markets seem to respond in real time, it can create a sense that everything is moving at once. Even disciplined, long-term investors may find themselves feeling uneasy, distracted, or tempted to make sense of every new development as it unfolds.

That emotional weight is real. Money is never just about numbers on a page. It is tied to your future, your family, your goals, and your sense of security. In seasons like this, it is important to acknowledge that stress rather than dismiss it.

At the same time, moments like these are also a reminder of something we have long believed: perspective matters most when uncertainty feels the loudest.

While every period of uncertainty has its own causes, the underlying challenge for investors is often the same: how to remain thoughtful when the world feels reactive. With that in mind, here are three things we believe are especially important to consider during volatile times.

1. Not every headline requires a decision.

Today’s news cycle is immediate, constant, and often designed to provoke urgency. Political developments, economic reports, and market reactions can make it feel as though action is always necessary. In reality, not every piece of news should lead to a change in investment strategy. Reacting too quickly to short-term developments can sometimes do more harm than the volatility itself.

2. Volatility often tests behavior more than it changes fundamentals.

Market fluctuations are uncomfortable, but they are not unusual. Over time, markets have moved through elections, policy changes, recessions, global conflict, and countless other disruptions. What often has the greatest long-term impact is not the event itself, but how investors respond to it. Staying disciplined during uncertain periods is rarely easy, but it is often essential.

3. Your financial plan should be anchored to your life, not the moment.

Your investment strategy should reflect your goals, your time horizon, and your tolerance for risk. That foundation matters most when the environment becomes noisy. A well-built plan is not meant to shift with every headline. It is meant to provide structure, clarity, and resilience through changing conditions.

At CrossleyShear, this is the lens through which we guide our work every day. We remain attentive, thoughtful, and actively engaged in the management of your portfolio, but we do so with discipline rather than reaction. Our role is not simply to respond to volatility. It is to help keep your investment strategy aligned with what matters most to you.

In uncertain times, we believe calm perspective is one of the most valuable things an advisor can offer. As always, we are here to answer questions, talk through concerns, and help you move forward with confidence.

A Few Personal Updates from Our Team

Even in busy and uncertain seasons, we are always grateful for the personal milestones and meaningful moments that remind us of what matters most. We are pleased to share a few recent updates from the CrossleyShear family:

• Evan Shear — Evan and his family are celebrating an exciting milestone as his daughter, Hadyn Shear, prepares to graduate from Tulane in May. She will then head to New York University to begin graduate school and pursue her Doctorate of Physical Therapy.
• Andrew Hall — Andrew and his family are cheering on his daughter, Kate Hall, as she prepares to run the London Marathon on April 25, an incredible accomplishment and memorable experience.
• Shaun Jones — Shaun and his family are enjoying a special season as their daughter, Bella, settles into her first semester at the University of Miami.

Thank you, as always, for your continued trust and for allowing us to be part of your journey.

Any opinions are those of CrossleyShear Wealth Management and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. All opinions are as of this date and are subject to change without notice. Past performance is not a guarantee of future results.

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