OBBBA: No IRA Changes, but more Roth Conversions?
Let’s be clear about the “One Big Beautiful Bill Act of 2025” (OBBBA), enacted on July 4. There is no “SECURE 3.0” in this legislation. It does NOT contain any changes DIRECTLY related to IRA or retirement plan rules.
There is nothing in the law specifically about Roth accounts. Nothing about Roth SEP IRAs. Nothing about 529-to-Roth conversions, Roth IRA contribution limits or any of the Roth topics we typically write about. However, what the law does contain are several items that tangentially relate to our bailiwick. Most of it can be framed as more items to consider – and more opportunities – when it comes to Roth conversions.
Examples of Roth Conversion Opportunities
- The reduced federal individual income tax rates, originally enacted in the 2017 Tax Cuts and Job Act, are extended “permanently” (until Congress decides to change them). This expands the opportunity to do Roth IRA conversions at low brackets for future years.
- For 2025, the standard deduction increases to $15,750 (from $15,000) for individuals, and $31,500 (from $30,000) for married filing jointly (MFJ). There are annual inflation increases for subsequent years. This will expand the opportunity to do Roth IRA conversions.
- There is a new $6,000 addition to the standard deduction for seniors aged 65 and older for years 2025-2028. This is per person, so a married couple could deduct up to $12,000 if each spouse is aged 65 or over. This is in addition to the regular standard deduction AND the extra deduction for those aged 65 or blind. This will expand the opportunity to do Roth IRA conversions. (Note that the deduction phases out beginning with modified adjusted gross incomes of $75,000 for individuals and $150,000 for those MFJ. It phases out completely at $175,000 and $250,000, respectively.)
- For those who itemize, the state and local tax (SALT) deduction is increased to $40,000, effective for 2025-2029, with a 1% increase each year. In addition, some pass-through business owners can work around the $40,000 limitation and get unlimited SALT deductions. More deductions could expand the opportunity to do more Roth IRA conversions.
- Taxpayers taking the standard deduction will now be able to make deductible charitable contributions, up to $1,000 for individuals and $2,000 for those MFJ. This could expand the opportunity to do more Roth IRA conversions.
- There are now tax deductions for tips and overtime. While there are caps and phase outs, this could expand the opportunity to do more Roth IRA conversions.
- The Child Tax Credit is permanently increased to $2,200 per child (effective in 2025), with annual inflation increases. Income limits remain the same at $200,000 (individuals), and $400,000 (MFJ). Guess what? More deductions could expand the opportunity to do more Roth IRA conversions.
Have I been repeating myself? If so, my apologies. Oh, and one more thing…Did you know that there are now more opportunities to do larger Roth conversions?
By Andy Ives, CFP®, AIF®
IRA Analyst
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.