A Roth IRA conversion converts pre-tax Traditional IRA or 401(k) funds to after-tax Roth funds. Federally, the converted amount is ordinary income (taxed at 10–37%). State taxation depends on your state of residence in the year of conversion: in California, a $100,000 conversion adds roughly $5,000 of state tax if you have no other income and about $9,300 if it is stacked on $200,000 of other income (the 13.3% top rate, $13,300 per $100,000, applies only above $1 million of taxable income); in Florida or Texas, it adds $0. The strategic opportunity: complete Roth conversions in years when you are a resident of a no-income-tax state — or before high-income years push you into higher brackets.
At a glance
Key Facts
Federal Tax on Conversion
Converted amount taxed as ordinary income; federal rates 10–37%; increases AGI and may affect ACA subsidies, Medicare IRMAA, and other income-based thresholds
Best States for Conversions
Florida, Texas, Nevada, Wyoming, South Dakota, Washington State (for Traditional IRA income, through 2027 — see the Washington note below): 0% state tax on conversions
Worst States for Conversions
California: up to 13.3% additional state tax; New York: up to 10.9% (only above $25 million of income); Hawaii: up to 11%; Oregon: up to 9.9%
Conversion + Move Strategy
Moving to a no-tax state before doing Roth conversions saves the full state income tax rate on the converted amount — potentially tens of thousands of dollars for large balances
Traditional IRA Basis
If your Traditional IRA has non-deductible (after-tax) contributions (basis from Form 8606), the conversion is only partially taxable — only the pre-tax portion is income
Mega Backdoor Roth
After-tax 401(k) contributions converted to Roth (Mega Backdoor Roth) follow similar rules — the pre-tax earnings portion is taxable at conversion; the after-tax basis is not
Introduction
The Roth IRA conversion is one of the most powerful retirement tax planning tools — converting pre-tax savings to after-tax Roth funds that grow and withdraw tax-free forever. But the state income tax dimension of Roth conversions is often overlooked. The difference between completing a conversion as a California resident vs. a Florida resident can be roughly $5,000 to $13,300 per $100,000 converted, depending on your other income — a significant optimization opportunity for those planning a state change.
Section 01
Roth IRA Conversion: Federal Tax Mechanics
A Roth conversion is straightforward federally:
What Is Taxed
The converted amount (minus any non-deductible basis tracked on Form 8606) is added to your ordinary income in the year of conversion. If you convert $100,000 from a Traditional IRA to a Roth IRA, you add $100,000 to that year's taxable income. At a 24% federal bracket, that is $24,000 in federal income tax. State income tax is additional.
AGI Effects
Roth conversions increase your Adjusted Gross Income (AGI), which affects: ACA marketplace subsidies (conversions above certain income levels phase out the Premium Tax Credit), Medicare IRMAA surcharges on Part B and Part D premiums (high-income retirees pay more), the Net Investment Income Tax (3.8% on investment income if MAGI exceeds $200K single), and phase-outs of other deductions/credits. Plan conversions carefully around these thresholds.
Optimal Conversion Strategy
The best years to convert are: low-income years (retirement gap before Social Security/RMDs begin), years you are in a lower bracket than expected in future years, and years when you live in a low-tax or no-tax state. The worst year to convert: a high-income year in a high-tax state when you are near the top federal bracket and maximum state rate.
Section 02
State Tax on Roth Conversions: State-by-State Guide
State tax treatment of Roth IRA conversions follows the state's treatment of IRA/retirement income:
States With No Tax on Roth Conversions
Florida: No state income tax — $0 state tax on any Roth conversion amount
Texas: No state income tax — $0 state tax
Nevada: No state income tax
Wyoming: No state income tax
South Dakota: No state income tax
Washington State: No income tax on Traditional IRA distributions for 2026 and 2027, and Roth conversions are not subject to the WA capital gains tax (which exempts assets held in IRAs and other retirement accounts). Watch 2028 onward: ESSB 6346 (signed 30 March 2026) imposes a 9.9% tax on household income above a $1 million standard deduction starting 1 January 2028 and is facing legal challenges; we have not confirmed how it will treat IRA conversions, so model very large conversions after 2027 before assuming $0.
Tennessee: No income tax on wages or retirement income
New Hampshire: No income tax on wages (dividends/interest tax eliminated 2025)
States With Full State Tax on Conversions
State
Top Rate on Conversion
State tax on a $100K conversion: no other income / stacked on $200K of other income (single filer, 2026, approx.)
California
13.3% (12.3% + 1% on taxable income over $1 million)
~$5,000 / ~$9,300
Hawaii
11%
~$5,800 / ~$8,900
New York
10.9% (only above $25 million of income)
~$4,900 / ~$8,700 (state only; New York City adds its own resident tax)
The top rate only applies to the highest slice of income. A conversion is taxed at your marginal rates, so the state tax on a given conversion depends on your other income (figures above come from our single-filer, standard-deduction state engine and are not a substitute for a full return).
States With Partial or No Tax on IRA Distributions
These states exempt many IRA distributions from state income tax; treatment of conversions varies, as noted below:
Pennsylvania: Distributions from an IRA after the qualifying retirement age (generally 59½) are not taxable. For conversions, the PA Department of Revenue guidance says direct rollovers are not taxable under PA personal income tax law, so a trustee-to-trustee conversion generally is not taxed; any amount not actually moved into the Roth IRA (for example, tax withheld from the distribution) may be taxable, so confirm with a PA CPA
Illinois: Retirement income (including IRA distributions) is exempt from Illinois income tax, and the Illinois Department of Revenue's Publication 120 lists amounts rolled over to a Roth IRA among the federally taxed IRA amounts you may subtract on Form IL-1040 (attach pages 1 and 2 of your federal return)
Mississippi: Qualifying retirement income is generally not subject to Mississippi income tax, but early distributions are not treated as retirement income. The Mississippi Department of Revenue guidance we reviewed does not address Roth conversions specifically, so confirm before relying on an exemption
The Move-Then-Convert Strategy
The most powerful Roth conversion strategy for high-tax-state residents with large pre-tax IRAs: (1) Retire or semi-retire at a point when ordinary income drops; (2) Change domicile to Florida, Texas, or Nevada; (3) Complete Roth conversions in the no-tax state. The state tax saving on a $500,000 conversion (single filer, 2026, approx.): California about $43,700 with no other income or about $51,900 if stacked on $200,000 of other income; New York about $33,700 or $36,100 respectively (state tax only; New York City residents also owe city tax). This is a strategy that requires careful execution of genuine domicile change (see state residency guides for California and New York).
Roth conversion optimization requires careful income projection, bracket analysis, and state residency planning. TaxHub connects you with CPAs who specialise in retirement tax planning.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
US expats with Traditional IRA balances face special considerations for Roth conversions — treaty interaction, FEIE, and state residency. Greenback specialises in US expat retirement tax.
⚠ Not the cheapest option — best for complex situations and expats who want a dedicated CPA.
Can I do a Roth conversion after moving to Florida to avoid California tax?
Yes — if you are genuinely domiciled in Florida on the date of the Roth conversion, Florida applies 0% state income tax. California generally cannot tax Roth conversion income from a period when you were a Florida resident (unlike RSU/deferred compensation income from employment, which California allocates to the period you worked in CA). IRA distribution income is generally sourced to the state of residence at the time of distribution — not to where you worked when you earned the money. This makes Roth conversions an ideal post-departure tax planning strategy. Ensure your California departure is genuine and documented before the conversion.
Q
Does Illinois tax Roth IRA conversions?
Generally no. Illinois exempts retirement income — including pension, 401(k), and IRA distributions — from Illinois income tax, and the Illinois Department of Revenue's Publication 120 (Retirement Income) lists IRA amounts rolled over to a Roth IRA among the federally taxed retirement amounts you may subtract on Form IL-1040, Line 5 (you attach pages 1 and 2 of your federal return to support the subtraction). Because the subtraction applies only to the federally taxed portion, and other states or income types may differ, confirm your specific situation with a licensed Illinois CPA.
Q
What is the best year to do a large Roth conversion?
The optimal conversion year typically has: (1) Low other income — before RMDs begin, before Social Security begins, or in a low-income year; (2) You are in a lower federal bracket than you expect in future years; (3) You live in a no-tax or low-tax state; (4) Markets have declined (convert at lower values — lower tax on the same number of shares); (5) Tax rates are expected to rise (current federal rates are relatively low historically — the TCJA rates were made permanent by OBBBA in 2025, so only a future law change would raise them). Many retirees target the years between retirement and the age when required minimum distributions begin (age 73, or age 75 if you were born in 1960 or later) for Roth conversion 'filling' — converting enough to use up low brackets each year.
Disclaimer:This guide provides general tax information for educational purposes only. Roth IRA conversion tax rules are complex and interact with many other tax provisions. State treatment of IRA conversions varies and may change. This is not tax advice. Consult a CPA before executing large Roth conversions.