Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Updated July 28, 2026. Quick answer: Ordinary income — including a conversion — stacks below capital gains. So a conversion can push long-term gains that were sitting in the 0% bracket up into the 15% bracket, adding a cost that does not appear anywhere in the conversion’s own tax calculation.
The stacking order
Long-term capital gains are taxed at their own rates, but they sit on top of ordinary income. So the amount of gain that falls in the 0% band depends on how much ordinary income is underneath it.
Add a conversion and the floor rises. Gains that were free become taxable, at 15% or more, even though nothing about those gains changed.
This produces one of the sharpest conflicts in retirement planning: the same low-income early-retirement years are ideal for both cheap conversions and 0% capital-gain harvesting — and you generally cannot maximise both in the same year. Alternating years is the usual resolution.
Which to prioritise
It depends on which problem is larger. A very large traditional IRA facing future RMDs and a 10-year emptying by heirs usually argues for conversions. A large taxable account with big embedded gains and no plan to spend them argues for harvesting — particularly since those gains may get a basis step-up at death anyway, which conversions never do.
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
Sizing the conversion is still the first step, even though the stacking cost sits on top of it. The Roth conversion bracket calculator takes your income before any conversion and returns the ordinary-income room you have and what filling it costs. It prices the conversion’s own tax and not the gains the conversion may push upward, so treat its figure as the floor and read the effect described above against it.