If you live in Washington and you have money sitting in a traditional IRA or 401(k), a Roth conversion costs you less than it costs almost anyone in Oregon. Washington has no personal income tax through 2027, so the only tax bill on a conversion is the federal one. A new state income tax on very high incomes starts in 2028, which makes the next two years unusually valuable for anyone weighing a large conversion. An Oregon resident doing the exact same conversion can owe up to 9.9% in state tax on top of that. At Lewis Group CPAs, we’ve been working with business owners and individuals on both sides of the Columbia since 1994, and this is one of the clearest planning advantages Washington residents have. It also has a hard deadline: December 31.
What a Roth conversion actually does to your taxes
A conversion moves money from a pre-tax retirement account into a Roth account. You pay ordinary income tax on the converted amount this year. In exchange, that money grows tax-free from here on out, qualified withdrawals come out tax-free, and it isn’t subject to required minimum distributions during your lifetime. The IRS explains the mechanics of Roth IRAs and conversions if you want the primary source.
The math is a bet on tax rates. You’re choosing to pay tax now at a rate you know instead of later at a rate you don’t. That bet gets a lot more attractive when your current rate is artificially low, and it gets more attractive still when your state takes nothing.
The Washington versus Oregon difference
Convert $150,000 as a Washington resident and your state income tax on that conversion is zero. Convert the same $150,000 as an Oregon resident and you’re looking at state tax at rates that climb to 9.9% at the top of Oregon’s personal income tax brackets. On $150,000, that spread is real money that stays invested instead of going to Salem.
One clarification worth making, since it comes up: Washington’s capital gains excise tax doesn’t apply here. That tax runs 7% on long-term gains above the standard deduction and 9.9% on gains above $1 million, following the surcharge added by Senate Bill 5813 in 2025. Neither tier reaches a conversion. Retirement account assets are exempt, and a conversion generates ordinary income, not capital gain. The Department of Revenue’s capital gains tax page lays out the exemptions.
What changes in 2028, and why this year matters more than usual
Washington’s 2026 legislature enacted a state income tax. Senate Bill 6346, signed March 30, 2026 as Chapter 238, Laws of 2026, imposes a 9.9% tax on Washington taxable income above a $1,000,000 standard deduction. It applies to tax years beginning January 1, 2028, with the first returns due in 2029.
Three details matter for conversion planning. The $1,000,000 deduction is a single amount shared between spouses rather than $1,000,000 each. The tax base starts from federal adjusted gross income, and retirement distributions are part of it, with no exemption for pensions or retirement benefits. A Roth conversion is ordinary income, so a conversion large enough to carry Washington taxable income past $1,000,000 would be taxed at 9.9% once the law is in force.
For most people reading this, that floor is far above where a sensible conversion lands. Filling the top of the 22% bracket does not come close to $1,000,000. But if you have a large pre-tax balance and you have been weighing one big conversion rather than a series of small ones, 2026 and 2027 are the last two years in which Washington takes nothing regardless of size. From 2028, a conversion of that scale would face the same 9.9% Washington has always let residents avoid, which happens to match Oregon’s top rate.
One caution against acting as though 2028 is settled: the tax is widely expected to draw legal challenges, and Washington has a long history of litigation over income taxation. Plan around what is on the books, and expect to revisit it.
Who should be running the numbers this quarter
Three situations tend to produce the best result.
You’re retired but not yet taking RMDs. The window between the year you stop working and the year required minimum distributions begin, currently age 73 and rising to 75 for people born in 1960 or later, under the rules described in the IRS required minimum distribution FAQs, is often the lowest-income stretch of your adult life. Your taxable income may be Social Security plus a little interest. That leaves room in the 10%, 12%, and 22% brackets that will never be that empty again. Once RMDs start, they stack on top of everything else and push you higher.
You had a low-income year as a business owner. A slow year, a big equipment purchase, a net operating loss, a year you sold the business and took an installment structure. Low income is painful, but it makes deductions and low brackets cheap to fill. A conversion turns a bad year into a permanent tax advantage.
You have a large pre-tax balance and heirs. Inherited traditional IRAs generally have to be emptied within ten years, often landing in your children’s highest-earning decade. Converting now, at your rate, in a no-income-tax state, can cost far less than what your beneficiaries would pay later.
Fill the bracket, don’t blow through it
The goal usually isn’t to convert everything. It’s to convert exactly enough to reach the top of a target bracket and stop.
Say you’re married filing jointly with $70,000 of taxable income and you want to stay inside the 22% bracket. The conversion amount is the gap between your projected taxable income and that bracket ceiling. Get it right and every converted dollar is taxed at 22%. Overshoot by $40,000 and the excess jumps to 24%, and the ripple effects start.
Those ripple effects are where people get hurt:
- The senior deduction. If you are 65 or older, the One Big Beautiful Bill Act gives you an extra $6,000 deduction for 2025 through 2028, or $12,000 for a married couple where both spouses qualify. It shrinks by 6 cents for every dollar of income above $75,000 single or $150,000 joint, and disappears entirely at $175,000 and $250,000. A conversion sized without this in mind can cost you the whole deduction on top of the tax you expected to pay.
- Medicare premiums. Your Part B and Part D premiums are based on income from two years prior. A large conversion at 63 can raise your premiums at 65. The Social Security Administration explains the income-related premium adjustment.
- Social Security taxability. More income means more of your benefit becomes taxable, which creates an effective rate higher than your stated bracket.
- ACA premium credits. If you’re buying marketplace coverage before Medicare, this one is harsher in 2026 than it was last year. The enhanced subsidies expired at the end of 2025, so the 400% federal poverty level cliff is back. Income one dollar over the line ends the subsidy completely rather than reducing it, which for a couple in their early sixties can mean thousands of dollars a month.
- The 0% capital gains bracket. Conversion income stacks underneath long-term gains and can push gains you were going to realize tax-free into a taxable range.
None of these are reasons to skip a conversion. They’re reasons to model it before you execute it rather than after.
December 31 is the deadline, and there are no do-overs
Roth conversions are not like IRA contributions. There’s no April 15 grace period. The transfer has to be completed by December 31 to count for this tax year, and custodians get busy in late December. Give yourself weeks, not days.
You also can’t undo it. Recharacterizing a conversion was eliminated by the 2017 tax law, so the amount you convert is locked in once it’s done. That’s exactly why the projection comes first.
Two practical points: pay the tax from a taxable account rather than by withholding from the conversion itself, so the full amount lands in the Roth. And remember that converted amounts carry their own five-year clock before earnings can come out penalty-free.
Get a conversion projection on the calendar
A useful projection means pulling your year-to-date income, estimating what’s left to come, and testing conversion amounts against your brackets, your Medicare exposure, your senior deduction if you qualify, your capital gains plan, and, for larger balances, how the 2028 state income tax threshold affects timing. That’s the work we do as part of our accounting services, and it feeds directly into the tax preparation work that follows in the spring. Documents come in through our own secure client portal, so we can see what we need without a stack of email attachments.
We have five licensed CPAs on staff and belong to the Washington Society of CPAs, the Oregon Society of CPAs, and AICPA & CIMA. We serve clients across Vancouver, Camas, Washougal, Battle Ground, La Center, Longview, Clark County, and Cowlitz County, along with clients throughout Washington and Oregon.
Reach out now and we’ll have time to run the numbers, look at a few conversion amounts side by side, and execute calmly before the December 31 cutoff. Visit lewisgroupcpas.com/contact/ or call (360) 896-8221. Waiting until mid-December turns a good decision into a rushed one.
