Retirement planning often comes down to more than just investment choices. Taxes can play a huge role in how much of your money you actually get to keep. Two tax rules that frequently collide for retirees are Roth conversions and the State and Local Tax (SALT) deduction cap. Understanding how these interact could save—or cost—you thousands of dollars over the course of retirement.

What Is the SALT Deduction Cap?

Before 2017, most taxpayers could deduct state and local taxes—like property taxes and state income tax—on their federal returns without much limitation. But with the passage of the Tax Cuts and Jobs Act, the rules changed. The law imposed a $10,000 cap on SALT deductions ($40,000 for some filers under recent proposals).

For retirees in high-tax states such as California, New York, or New Jersey, this cap can mean losing out on significant deductions. Property taxes alone in these states can exceed the cap, not to mention state income taxes.

Where Roth Conversions Complicate Things

A Roth conversion allows you to move money from a traditional IRA into a Roth IRA. The benefit? Once in a Roth, your investments can grow tax-free, and qualified withdrawals aren’t taxed in retirement. The catch? You pay income tax on the converted amount in the year you make the conversion.

That added income from a Roth conversion could push you into a higher tax bracket. More importantly, it could shrink or eliminate your ability to take advantage of the SALT deduction. The tax code includes “phaseouts” that reduce deductions as your income climbs. That means a large Roth conversion could inadvertently wipe out deductions you would otherwise claim.

Short-Term Pain, Long-Term Gain?

So, should you avoid Roth conversions altogether? Not necessarily. As Leibel Sternbach explains, the answer depends on your unique situation. The real question is whether the long-term benefits of tax-free growth outweigh the short-term loss of deductions.

For example, if you expect required minimum distributions (RMDs) to push you into higher tax brackets later in life, paying some tax now through a Roth conversion could make sense. Similarly, if you’re concerned about your spouse’s tax situation after you pass away, converting at today’s rates might save your surviving spouse from much higher taxes in the future.

Key Questions to Ask

Deciding whether a Roth conversion makes sense alongside the SALT cap requires some careful math and forward-looking assumptions. Ask yourself:

• Will I be in a higher or lower tax bracket in the future?

• How will RMDs affect my taxable income?

• Could my spouse or heirs face higher taxes if I don’t convert?

• Is the loss of today’s deductions worth the potential future savings?

Strategies to Consider

1. Partial Conversions – Instead of converting everything at once, spread conversions over several years to manage tax brackets.

2. Use Low-Income Years – Take advantage of years between retirement and when you start Social Security or RMDs to convert at lower rates.

3. Run the Numbers – Use calculators or work with an advisor to project different scenarios before making decisions.

The Bottom Line

Roth conversions and the SALT deduction cap highlight the complexity of retirement tax planning. There’s no one-size-fits-all answer. For some, conversions will provide lasting tax relief. For others, the lost deductions may outweigh the benefits.

The best step you can take is to run the numbers for your unique circumstances and revisit your plan regularly as tax laws and personal situations change.

At Yields4U, we specialize in helping retirees navigate these complex decisions with clarity and confidence. That’s why we offer a free Retirement Tax Bomb Analysis—a personalized look at how strategies like Roth conversions impact your long-term retirement security.

👉 Schedule your analysis today at https://www.yields4u.com/pages/book  and make sure your retirement plan works for you, not against you.