For the first time in almost a decade, you know exactly what your tax rates are going to be. Here is what to do with that certainty.
What Changed
The One Big Beautiful Bill Act made the Tax Cuts and Jobs Act rates permanent. The 37% top rate stays. Seven brackets, locked in, no sunset. The uncertainty that dominated tax planning conversations since 2017 is over. Rates are not going up on January 1, 2026, and there is no scheduled expiration forcing Congress to act again. That alone changes the planning calculus for every retiree with a meaningful IRA balance.
But Congress did not just extend existing law. It added something new. And for retirees in the right income range, it matters more than the rate permanence itself.
The Senior Bonus Deduction (2025-2028)
For tax years 2025 through 2028, taxpayers age 65 and older get an additional deduction of $6,000 per person on top of the standard deduction. For a married couple filing jointly where both spouses are 65 or older, that is $12,000.
This is separate from the existing age-related addition to the standard deduction (roughly $1,650 per spouse age 65+, indexed for inflation). It stacks on top.
Here is what the full picture looks like for a married couple, both 65+, in 2026:
| Deduction Component | Amount |
|---|---|
| Standard deduction (MFJ) | $32,200 |
| Age-related addition (two spouses 65+) | ~$3,300 |
| Senior bonus deduction (two spouses 65+) | $12,000 |
| Total deduction | ~$47,500 |
That is roughly $47,500 in income that owes zero federal tax. For a retired couple with modest income, this creates one of the largest effective zero-brackets we have seen.
The catch: The senior bonus deduction phases out. It begins reducing at $75,000 MAGI for single filers and $150,000 MAGI for married filing jointly. The reduction is six cents for every dollar over the threshold. For a single filer, the deduction disappears entirely at $175,000 MAGI.
The other catch: It expires after 2028. This is a four-year window (2025-2028). Congress may extend it, but planning around what exists today is more reliable than planning around what might happen later.
The phase-out means this deduction is targeted squarely at retirees living primarily on Social Security, modest pension income, and controlled withdrawals. If your modified adjusted gross income stays below $150,000 as a couple, you get the full benefit. If you are well above that threshold, this section is less relevant to you, but keep reading. The Roth conversion math still works at higher income levels, just with different numbers.
The Roth Conversion Sweet Spot
Permanent rates plus the senior bonus deduction create a conversion window that did not exist before 2025.
The logic is straightforward. If your current taxable income is low (because you are retired, living on Social Security, and not yet taking RMDs), you have room in the lower tax brackets. Every dollar you convert from a traditional IRA to a Roth IRA fills those brackets at today's known rates. Those dollars then grow tax-free and come out tax-free for the rest of your life. No RMDs. No IRMAA impact. No taxable income for your heirs.
Let's walk through a hypothetical.
David and Maria are ages 66 and 64. Both retired. They live in Florida (no state income tax). Their combined Social Security benefit is $55,000 per year. They have $1.8 million in traditional IRAs. No pension. No other earned income.
Here is their 2026 tax picture before any conversion:
With the full ~$47,500 deduction (assuming Maria turns 65 in 2026 and both qualify), their base taxable income before any conversion is effectively zero. The deduction exceeds the taxable portion of their Social Security at this income level.
That means David and Maria can convert traditional IRA dollars starting near the bottom of the bracket structure:
| 2026 MFJ Bracket | Taxable Income Range | Tax Rate |
|---|---|---|
| 10% | $0 to $24,800 | 10% |
| 12% | $24,801 to $100,800 | 12% |
| 22% | $100,801 to $211,400 | 22% |
If they want to stay within the 12% bracket, they can convert roughly $100,000 in IRA dollars (filling the bracket up to $100,800). The federal tax on the conversion would be approximately $11,500 (10% on the first $24,800, 12% on the remainder). That is an effective rate of about 11.5% on dollars moved permanently out of the taxable system.
If they repeat this for three years (2026, 2027, 2028), they move roughly $300,000 from traditional to Roth at blended rates under 12%. Their remaining traditional IRA balance drops from $1.8 million to roughly $1.5 million (before growth), which meaningfully reduces their future RMD exposure.
Important note on the math: Social Security taxation has its own internal calculation. As conversion income rises, it can cause more of Social Security to become taxable (up to the 85% maximum). The example above simplifies this interaction. Your actual numbers require modeling with a tax professional who can account for the Social Security taxable income formula, state-specific rules if you live outside Florida, and any other income sources.
RMD Coordination: The Case for Gap-Year Conversions
Required minimum distributions start at age 73 for anyone born between 1951 and 1959, and at age 75 for those born in 1960 or later.
Here is what happens if David and Maria do nothing and let the full $1.8 million (plus growth) sit until age 73. Assuming modest growth, they might have $2.2 million or more by then. The first-year RMD on $2.2 million at age 73 is approximately $83,000.
Add that to their Social Security:
- Social Security: ~$55,000 (with ~85% taxable = ~$46,750)
- RMD: ~$83,000
- Total income before deductions: ~$129,750
After deductions (and assuming the senior bonus deduction has expired by then), their taxable income pushes into the 22% bracket. Possibly the 24% bracket in later years as the IRA balance continues to grow and RMD percentages increase with age.
This is the core problem. RMDs are not optional. Once they start, you lose control over the timing and amount of taxable income from your traditional IRA. Every dollar you convert before RMDs begin is a dollar that will never generate forced taxable income.
The years between retirement and RMD onset are often called "gap years." For many retirees, these are the lowest-income, lowest-tax years of their adult lives. Using them to fill lower brackets with Roth conversions is one of the highest-value planning moves available.
IRMAA: The Hidden Tax on High-Income Retirees
Medicare Income-Related Monthly Adjustment Amounts (IRMAA) are surcharges on Part B and Part D premiums for higher-income beneficiaries. They are based on your modified adjusted gross income from two years prior.
In 2026, the first IRMAA threshold for married filing jointly is $218,000. Below that, you pay the standard Part B premium of $202.90 per month. Above it, surcharges escalate through five tiers, with the highest tier beginning at $750,000 for married couples. A retired couple just over the first threshold can pay nearly $2,000 per year more in Medicare premiums.
The first threshold matters most for planning purposes. A retired couple with $200,000 in combined income is fine. Add $20,000 in unexpected capital gains, a larger-than-planned RMD, or a one-time Roth conversion, and they cross into the first surcharge tier.
This is why Roth conversion planning is not just about tax brackets. It is about future IRMAA exposure. Every dollar sitting in a traditional IRA will eventually become MAGI (through RMDs). Every dollar converted to Roth will not.
Planning note: Because IRMAA uses a two-year lookback, a large Roth conversion in 2026 affects your 2028 Medicare premiums. This is manageable if you plan for it, but it needs to be part of the model. The goal is not to avoid IRMAA entirely (sometimes paying the surcharge for one or two years is worth the long-term benefit of moving assets to Roth). The goal is to make the tradeoff intentionally, not accidentally.
QCD Strategy for Charitable Retirees
Qualified Charitable Distributions are available to anyone age 70 and a half or older. In 2026, you can direct up to $111,000 per person directly from your IRA to a qualified charity. The distribution counts toward your RMD but is excluded from your adjusted gross income entirely.
With the higher standard deduction (especially with the senior bonus deduction layered on), most retirees will not itemize. That means regular charitable donations provide zero tax benefit. You give $10,000 to your church, but because you are taking the standard deduction, that gift does not reduce your taxable income at all.
A QCD changes the equation completely. The $10,000 goes directly from your IRA to the charity. It never hits your tax return as income. It satisfies $10,000 of your RMD. And because it is excluded from AGI, it helps keep you below IRMAA thresholds and below the senior bonus deduction phase-out.
If you are over 70 and a half and giving to charity anyway, a QCD is almost always the right move. The only scenario where it might not be optimal is if you have specific reasons to want the income on your return (rare) or if you are making gifts to organizations that do not qualify (donor-advised funds, for example, do not qualify for QCDs).
One additional note: Designated Roth accounts in employer plans (Roth 401(k), Roth 403(b)) are no longer subject to RMDs as of 2024, thanks to SECURE 2.0. If you have a Roth 401(k) balance from a former employer, it no longer generates forced distributions. This removes one more reason to roll Roth 401(k) assets into a Roth IRA solely for RMD avoidance.
Putting It Together
The 2026-2028 window gives retirees a combination of factors that may not align again:
- Permanent, known tax rates that remove the guessing game around future bracket changes.
- A temporary senior deduction that increases the zero-bracket for retirees under $150,000 MAGI.
- A natural gap between retirement and RMD onset (especially for those born in 1960 or later, who now have until age 75).
- QCD availability that solves the charitable-giving-without-itemizing problem and reduces AGI.
Each of these tools works independently. Together, they create a coordinated strategy: convert traditional IRA dollars at low rates during the gap years, use QCDs to manage RMDs and AGI once distributions begin, and keep future MAGI below IRMAA thresholds.
None of this happens automatically. It requires modeling your specific numbers, understanding the interactions between Social Security taxation, conversion income, IRMAA lookback periods, and state tax rules. A spreadsheet is not optional. Neither is a CPA who understands the moving parts.
Certainty is a planning gift. The question is whether you will use the window while it is open.
If you want to model what this looks like for your specific situation, start a conversation with our team.
