CALCMONEY // ROTH CONVERSION // TX
Texas has no state income tax. Roth conversions here cost only federal tax, making TX one of the better states to convert.
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22.0%
$22,000
$55,000
| Conversion Amount | Federal Tax | TX State Tax | Total Upfront |
|---|---|---|---|
| $100K (22% federal) | $22,000 | $0 | $22,000 |
| $250K (22% federal) | $55,000 | $0 | $55,000 |
| $500K (32% federal) | $160,000 | $0 | $160,000 |
| Conversion | Upfront Tax | Roth Value (20yr) | Traditional Net |
|---|---|---|---|
| $100K conversion | $22,000 | $386,968 | $263,139 |
| $250K conversion | $55,000 | $967,421 | $657,846 |
Roth advantage depends on future vs current tax rates. If your rate at 72 (RMD age) is higher than today, converting now wins. If lower, traditional may win. State tax treatment of withdrawals matters: Texas exempts traditional IRA distributions, which reduces the Roth advantage.
Texas has no state income tax. Roth conversions cost only federal tax, making this one of the most favorable states for large conversions. A $250K conversion at the 22% federal bracket costs $55,000 in total tax with no state component.
The break-even calculation is simpler in Texas: if your future federal marginal rate at retirement exceeds your current rate, converting now wins. If you expect to be in a lower bracket at 73 (RMD age), traditional may outperform. Most HNW investors with $1M+ in tax-deferred accounts benefit from partial conversions during low-income years.