Can a Roth Conversion Affect Health Coverage Costs?
A lower-income year can look like a good opening
Someone who retires before claiming Social Security may see the first few years of retirement as a planning opportunity. Wages have stopped. Required distributions may not have started. The tax bracket may be lower than it was during working years. That is often when Roth conversions come up in the conversation.[1][2]
A Roth conversion moves money from a tax-deferred retirement account into a Roth account after income tax is paid under current law. The usual comparison is straightforward: pay tax now on the converted amount, or leave the money in the tax-deferred account and pay tax later when distributions are taken. Professional planning literature frames the value of that choice in terms of current and expected future tax rates, time horizon, and retirement income projections.[2]
That comparison matters, but it is not the whole decision. A tax move can change the income number used in other parts of life. If a household buys health insurance through the Marketplace, a conversion may affect costs outside the tax return. The same review point can matter for someone near Medicare age.[3][4][5][6]
What changes when conversion income shows up?
The conversion itself can raise adjusted gross income for the year. That can affect tax brackets and other tax calculations. It can also matter because several health-cost rules look at modified adjusted gross income, not just the tax due shown on a projection.[3][5]
For Marketplace coverage, the income number used for premium tax credit eligibility is based on modified adjusted gross income. HealthCare.gov explains that the calculation starts with adjusted gross income. It then adds certain amounts, such as untaxed foreign income, non-taxable Social Security benefits, and tax-exempt interest. KFF also notes that household income can include the taxpayer and spouse for premium tax credit purposes. It can also include dependents who are required to file a tax return.[3][5]
This means the household effect can be different from the conversion amount alone. For a married couple still buying Marketplace coverage, the conversion may affect the household income estimate. That estimate is used for coverage assistance. A dependent’s income can also be a review point. This is especially important when the dependent must file a return.[3][5]
How could this affect Marketplace coverage?
Marketplace subsidies are not finally settled when coverage begins. KFF explains that premium tax credits are reconciled against final annual income on the federal tax return. If income was underestimated, the household may have to repay some excess advance premium tax credits when the return is filed.[4]
That is why any change in income during the year should be reported to the Marketplace. HealthCare.gov tells consumers to report income changes because they can affect coverage assistance. If a household is receiving premium tax credits, a Roth conversion may need to be reported. That can be the case when the conversion increases annual income.[3][4][5]
This does not mean a conversion is automatically a mistake. It means the conversion amount should be reviewed alongside the health coverage estimate. A smaller conversion, a different year, or a decision to accept a subsidy change may each lead to a different result for the household.[2][4][5]
How could this affect Medicare premiums later?
Medicare premiums can also depend on income. Higher-income Medicare beneficiaries may owe income-related monthly adjustment amounts. These amounts are in addition to standard Part B and Part D premiums. Consumer Medicare explainers often describe IRMAA as an added cost. It applies to higher-income beneficiaries enrolled in Part B or Part D.[7][6]
The timing can surprise people. Medicare IRMAA is often experienced with a two-year lookback, so a one-time income spike can affect premiums later. A conversion in one year may not feel directly related to a future Medicare premium notice, but the income link can make that connection real.[8][6]
CMS announced that the 2026 standard Medicare Part B premium is $202.90 and the 2026 Part B deductible is $283. CMS also released 2026 Part D income-related monthly adjustment amounts. Those figures do not determine whether a Roth conversion is suitable, but they show why Medicare costs warrant inclusion in the review.[7]
The tradeoff is not just taxes now versus taxes later
Academic research has found that taxpayers often use Roth conversions in lower-tax years and may convert only part of an IRA. That pattern fits the practical reality. The decision is often not all-or-nothing. It is usually about how much income to recognize in a specific year.[1]
Partial conversions can help a household test the tradeoff more carefully. The tax cost may be acceptable at one conversion amount but less attractive at a higher amount. The same can be true when Marketplace subsidies or future Medicare premiums are included in the review.[1][2][4][6]
There is also a life side to the decision. A household may be trying to bridge the gap between retirement and Medicare. Another may be trying to reduce future taxable retirement income before required distributions begin. The tax move should be viewed in the same frame as the coverage year, the Medicare lookback window, and the retirement income plan.[1][2][3][8]
Dovetail Principle: Timing Can Change Which Options Remain
A lower-income year can create room to consider a Roth conversion, but the timing only helps if the other income-linked effects stay in view. Marketplace coverage assistance, Medicare premium lookbacks, and future retirement income can all make the same conversion amount feel different depending on the year it appears. That is why the better question is not only whether to convert, but also what this timing change is, before the choice becomes harder to adjust to.
What should be reviewed before deciding?
Start with the income year. Ask what income will already appear on the return and how much the conversion would add. Then check whether the household is receiving premium tax credits through the Marketplace. Also review whether the conversion year is close to a Medicare premium year affected by the lookback.[3][4][8]
Next, compare conversion amounts rather than only asking whether to convert. A smaller amount may still serve a retirement tax-planning purpose while yielding a different result for health coverage assistance or later Medicare premiums. The useful question is often not “Is a Roth conversion good?” It is “What changes at this conversion amount?”[2][4][5][6]
Finally, keep the decision tied to what can actually be reviewed. The current tax bill can be estimated. Marketplace income can be updated during the year. Medicare premium exposure can be considered before a large income spike is created. None of those steps guarantees the best answer, but they can make the decision more visible before it becomes hard to change.[3][4][7][8]
A tax move is still a tax move. But in retirement planning, it may also be a health coverage move, a Medicare premium move, and a retirement income timing move. Before converting, ask a clearer question: What else changes if this income appears on this year’s return?[2][3][4][6]
Related Reading: Retirement Tax Planning. A Roth conversion may start as a tax question, but the better review is often what the decision changes across income, Medicare costs, and the rest of retirement.
About the author
Ross Marino, CFP®, CeFT®, is the Founder & CEO of Dovetail Financial and creator of Human-First Financial Guidance®. He helps people nearing or living in retirement connect their lives and wealth so that financial decisions become clearer, more personal, and easier to navigate.
Notes
- Why Do People Engage In Roth Conversions?. National Tax Journal via IDEAS/RePEc.
- The Arithmetic of Roth Conversions | Financial Planning Association. Financial Planning Association.
- Count income & household size. HealthCare.gov.
- What are premium tax credits and how do they work?. KFF.
- Explaining Health Care Reform: Questions About Health Insurance Subsidies. KFF.
- What is the income-related monthly adjusted amount (IRMAA)?. medicareresources.org.
- 2026 Medicare Parts A & B Premiums and Deductibles. Centers for Medicare & Medicaid Services.
- The 2-Year IRMAA Rule Blindsided You, Spiking Your Medicare Costs. Now What?. Kiplinger. Updated June 30, 2026.
Disclosure: This content is provided by Dovetail Financial Group LLC (“Dovetail Financial”) for informational and educational purposes only. It is not intended as, and should not be construed as, individualized investment, tax, legal, or accounting advice; a recommendation to buy or sell any security; or a recommendation to adopt any investment strategy. Because each person’s situation is unique, readers should consult their own financial, tax, and legal professionals before taking action based on this content.
Information contained herein is believed to be reliable, but its accuracy or completeness is not guaranteed. Any opinions expressed are current as of the date of publication and are subject to change without notice. All investing involves risk, including the possible loss of principal. Asset allocation and diversification do not guarantee profits or protect against losses in declining markets. Past performance is not a guarantee of future results. Dovetail Financial Group LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information about Dovetail Financial Group LLC, including Form ADV Part 2A and Form CRS, is available at adviserinfo.sec.gov. © 2026 Dovetail Financial Group LLC. All rights reserved.
