Updated July 28, 2026. Quick answer: If you buy health insurance on the marketplace, the premium subsidy phases out as income rises — and the loss can exceed the income tax on the conversion itself. For a pre-Medicare retiree this is often the binding constraint, not the bracket.
Why this hits exactly the people who convert
The best conversion years are usually between retirement and Social Security — low income, wide brackets. That is precisely the window when many people are also buying their own health insurance on the marketplace, where the subsidy is calculated from that same income.
So the years that look cheapest on a tax table can be the most expensive once the premium credit is priced in.
Model the subsidy loss as part of the conversion cost, not as a separate matter. A conversion that adds a modest amount of tax can cost several times that in premiums, and the effect is a step rather than a slope in some ranges — a small additional conversion can trigger a large loss.
The sequencing that usually resolves it
Convert aggressively once on Medicare, where the marketplace subsidy no longer applies — while watching IRMAA instead, which is the constraint that replaces it. The two rarely bind at once, which is why the conversion plan usually has two distinct phases.
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.