Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
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Updated July 28, 2026. Quick answer: You convert a number of shares but you are taxed on their value. Converting while the account is depressed moves the same holdings for less tax, and everything the recovery adds happens inside the Roth, tax-free.
The arithmetic
| Convert at the peak | Convert 25% down | |
|---|---|---|
| Shares moved | 1,000 | 1,000 |
| Value taxed | $100,000 | $75,000 |
| Tax at 24% | $24,000 | $18,000 |
| Recovery to $100,000 | — | Happens inside the Roth, untaxed |
Same holdings, same eventual value, $6,000 less tax — purely from when the measurement was taken.
The old escape hatch is gone. Before 2018 you could convert, watch the market fall, and undo it. That option was repealed, so converting into a falling market is now a one-way bet — which argues for converting in tranches rather than all at once.
The discipline problem
This requires acting when markets are frightening, which is when almost nobody executes optional tax manoeuvres. Deciding the trigger in advance — a percentage decline, a fixed amount — is the difference between a strategy and a good intention.
Price the conversion before you make it
A conversion cannot be undone once it is done, so it is worth having someone model the bracket it fills, the knock-on effects on your other income and how long the money has to compound before you settle on an amount.
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Sources
IRC §408A (Roth IRAs); IRC §408A(d)(3) (conversions); IRC §1411 (net investment income tax); IRC §86 (taxation of Social Security benefits); IRC §6654 (estimated tax); Tax Cuts and Jobs Act (2017) §13611 (repeal of conversion recharacterisation). Cross-checked July 2026 against professional analyses. Indexed thresholds are described rather than asserted, because they change annually.
This states what the cited authority says. It is not tax advice, and a conversion interacts with the rest of your return in ways one page cannot see.
Related
A depressed balance changes what a conversion costs, not how much room you have to absorb it. The Roth conversion bracket calculator takes the income you expect before any conversion and returns the room left in your bracket and the federal tax on filling it, so the shares you move while the value is low can be sized to the bracket rather than to the moment.