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 up to $13,300 in state tax; 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): 0% state tax on conversions
Worst States for Conversions
California: up to 13.3% additional state tax; New York: up to 10.9%; 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 $13,300 per $100,000 converted — 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 — Roth conversions are not subject to WA capital gains tax (which only applies to investment securities sales, not IRA distributions)
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
Tax on $100K Conversion
California
13.3%
$9,300–$13,300 depending on bracket
Hawaii
11%
~$9,000–$11,000
New York
10.9%
~$9,000–$10,900
Oregon
9.9% (+ Portland metro)
~$8,500–$13,900
Minnesota
9.85%
~$8,000–$9,850
New Jersey
up to 10.75%
~$6,000–$10,750 (depending on total income)
Vermont
8.75%
~$6,500–$8,750
States With Partial or No Tax on IRA Distributions
These states exempt IRA distributions or conversions from state income tax:
Pennsylvania: IRA distributions after qualifying age are fully exempt — Roth conversions may also be partially or fully exempt; consult a PA CPA for specifics
Illinois: Retirement income (including IRA distributions) is exempt from Illinois income tax — Roth conversions in Illinois may be exempt
Mississippi: All retirement income is exempt — Roth conversions may be exempt
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: California saves $50,000–$66,500; New York saves $40,000–$54,500. 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 cannot tax a 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?
Illinois generally exempts retirement income — including pension, 401(k), and IRA distributions — from Illinois income tax. The application to Roth conversions specifically depends on how the conversion is characterized under Illinois law (as a distribution vs. a conversion). Many Illinois tax practitioners take the position that Roth conversions of IRA funds are exempt from Illinois income tax under the retirement income exemption. Consult a licensed Illinois CPA for confirmation specific to your situation, as this is a nuanced area.
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 expire after 2025 unless extended). Many retirees target the years between retirement and age 73 (when RMDs begin) 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.