Presents ent’ s MAGI to $ 250,000— which triggers the elimination of the senior deduction.
“ At first glance, it appears that a $ 100,000 conversion would generate additional federal income taxes of $ 22,000, at a 22 % rate,” he said.“ However, the actual result is an increase in federal tax of $ 24,640, with the difference being the loss of the senior deduction.”
For clients who are not yet 65, he said, keep in mind that doing Roth conversions now could help them reduce their modified adjusted gross income in the future when they are past age 65, which would help them preserve their senior deduction when the time comes.
Next, he talked about changes to the state and local tax( SALT) deduction for those who itemize instead of taking the standard deduction. The SALT deduction increased from $ 10,000 to $ 40,000 this year and rises 1 % each year after that through 2029; after that it reverts to $ 10,000. Depending on the client’ s local and state tax situation, the extra deduction should“ increase the efficacy” of Roth conversions, he said. But advisors should make sure that the extra income logged as a result of the Roth conversion doesn’ t cause the client to exceed the $ 40,000 SALT limit.
The higher SALT deduction will also be phased out for higher income clients, he said. For clients with modified adjusted gross income between $ 500,000 and $ 600,000, the SALT deduction is reduced by 30 %. When the MAGI rises above $ 600,000, the SALT deduction reverts to the old rate of $ 10,000. Overall, he urged financial advisors to“ determine the efficacy of a Roth conversion” before recommending one, lest they bump up against these new limits and phaseouts, which could be costly.
Then again, he added, nothing is really permanent in the law. Historically, midterm elections almost always produce a change in Congress. So after 2026, a new Congress could undo the One Big Beautiful Bill Act and pass entirely new regulations.
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SEPTEMBER 2025 | FINANCIAL ADVISOR MAGAZINE | 53