A Roth conversion and Medicaid interact through two separate doors, and confusing them is a common planning error: a conversion raises your taxable income for the year, which can affect income-based (MAGI) Medicaid, but it does not by itself remove the account from the asset test that governs long-term-care Medicaid. The rules that apply depend entirely on which Medicaid pathway a person is using.
A Roth conversion is fully taxable and raises your modified adjusted gross income in the conversion year (Source: IRS Pub 590-A, 2025). That income spike can affect MAGI-based Medicaid and ACA subsidies, but long-term-care Medicaid uses an asset test, generally $2,000 for an individual and $3,000 for a couple (Source: CRS Report R43506), which a conversion does not change.
How a Roth conversion affects Medicaid depends on which Medicaid you mean
Medicaid is not one program with one eligibility test. Federal rules split it into two financial-eligibility methods, and a Roth conversion hits each one differently. One method counts only income; the other counts both income and assets. Knowing which applies to a given person is the whole question.
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Under 42 CFR §435.603, most non-elderly enrollees (children, adults age 19 to 64, parents, and pregnant women) qualify through the MAGI-based method, which uses the same modified adjusted gross income definition as the Affordable Care Act and, by rule, “must not apply any assets or resources test” (Source: 42 CFR §435.603(e) and (g), Cornell LII). For this group, a Roth conversion raises countable income in the conversion year, while assets are irrelevant.
The MAGI method does not apply to people age 65 or older where age is a condition of eligibility, people eligible on the basis of blindness or disability, or people seeking long-term services and supports such as nursing-facility or home- and community-based care (Source: 42 CFR §435.603(j), Cornell LII). These groups use SSI-based rules that include both an income standard and a resource (asset) standard.
Short version: for income-based (MAGI) Medicaid, a Roth conversion is an income event in the conversion year. For long-term-care or aged/blind/disabled Medicaid, the deciding factor is the asset test, generally $2,000 individual or $3,000 couple (Source: CRS Report R43506), and conversion-year income is not the main issue.
Why a Roth conversion is a taxable, MAGI-raising event
A Roth conversion is fully taxable in the year it happens, and the IRS treats the converted amount as includible in gross income. That income flows through adjusted gross income into modified adjusted gross income, the figure many benefit programs read. So a conversion raises MAGI for MAGI-Medicaid, ACA premium tax credits, and Medicare IRMAA in the conversion year (Source: IRS Pub 590-A, 2025).
Converting a traditional IRA to a Roth IRA is a taxable event in the year it happens. The IRS is explicit that a conversion is not an exception to the rule that traditional-IRA distributions are taxable: “Conversion distributions are includible in your gross income” (Source: IRS Pub 590-A, 2025). Where the traditional IRA holds only deductible contributions, the distribution is “fully taxable and is included in your modified AGI” (Source: IRS Pub 590-A, 2025).
That matters because MAGI generally equals adjusted gross income with only a narrow set of add-backs, so conversion income flows straight through AGI into MAGI (Source: IRS, “Modified adjusted gross income”). The number that many benefit programs read, including MAGI-Medicaid and ACA premium tax credits, is the number a conversion inflates.
Two features of current law make conversions harder to undo than many people expect. A conversion made in 2018 or later cannot be recharacterized, meaning it “cannot be reversed” once done (Source: IRS Pub 590-B, 2025, reflecting the Tax Cuts and Jobs Act). And a separate five-year “recapture” period runs for each conversion, starting the first day of the conversion year; withdrawing converted principal within that window before age 59½ can trigger a 10% additional tax (Source: IRS Pub 590-B, 2025). A Roth conversion is therefore a decision that generally cannot be walked back, which is why its interaction with benefit thresholds is worth understanding before acting.
Roth conversion and MAGI-Medicaid: the conversion-year income problem
For anyone who qualifies through MAGI-based Medicaid, a Roth conversion raises countable income in the conversion year and can affect eligibility for that year. The MAGI method uses the ACA income definition and applies no asset test (Source: 42 CFR §435.603(e) and (g), Cornell LII), so the risk here is the conversion-year income spike, not the size of the Roth balance.
MAGI-Medicaid income thresholds are set as a percentage of the federal poverty line and vary by state and category, so whether a given conversion pushes a household over the line is state-specific. The federal rule fixes only the methodology, not a single national dollar cutoff (Source: 42 CFR §435.603, Cornell LII).
The same conversion-year MAGI spike also reaches the ACA marketplace for people under 65. Premium-tax-credit MAGI equals AGI increased by excluded foreign earned income, tax-exempt interest, and the untaxed portion of Social Security benefits (Source: 26 U.S.C. §36B(d)(2)(B)). The 400%-of-poverty subsidy cliff, temporarily removed for tax years 2021 through 2025, returns for tax year 2026, and there is no repayment cap for years after 2025 (Source: IRS, “Eligibility for the Premium Tax Credit”). A 2026 conversion that lifts MAGI over 400% of the poverty line can end the subsidy and force full repayment of advance credits.
Roth conversion and long-term-care Medicaid: it is the asset test that governs
For long-term-care Medicaid, and for aged, blind, and disabled Medicaid generally, eligibility turns on an asset test rather than conversion-year income. SSI rules limit countable resources to $2,000 for an individual and $3,000 for a couple, a limit that “has not changed since 1989” (Source: CRS Report R43506). As a condition of long-term-services eligibility, an applicant “must liquidate all available resources unless there is a specific exemption” (Source: CRS Reports R43506 and RL33593).
This is the point most articles miss. Converting a traditional IRA to a Roth IRA changes the account’s tax character; it does not change whether the account is a countable asset. If the traditional IRA would have been counted, converting the same dollars into a Roth IRA leaves an asset of the same value inside the household. A conversion is not a spend-down, and a conversion inside a Medicaid look-back window does not remove the asset from the asset test.
Key distinction: a Roth conversion can hurt income-based (MAGI) Medicaid in the conversion year, but for long-term-care Medicaid the deciding factor is the asset test, generally $2,000 individual or $3,000 couple (Source: CRS Report R43506). A conversion moves dollars between account types; it does not make them disappear from the asset count.
Whether an IRA or Roth IRA is counted or exempt for long-term-care Medicaid is state-specific and not fixed by a single federal rule. Federal law confirms that applicants must liquidate available resources unless exempt (Source: CRS Report R43506), and many states treat retirement accounts differently depending on whether they are in required-minimum-distribution or payout status, counting only the income stream in some cases. Confirming the treatment requires checking the applicable state Medicaid manual.
The two Medicaid pathways side by side
The two Medicaid financial-eligibility methods respond to a Roth conversion differently. MAGI-based Medicaid counts conversion-year income and applies no asset test, while long-term-care and aged, blind, or disabled Medicaid apply an asset test where the account balance itself is the main concern. Which pathway applies depends on age, disability status, and whether long-term care is involved (Source: 42 CFR §435.603(j), Cornell LII).
The table below contrasts how a Roth conversion interacts with each Medicaid financial-eligibility method. The pathway that applies depends on the enrollee’s age, disability status, and whether long-term services and supports are involved (Source: 42 CFR §435.603(j), Cornell LII).
| Feature | MAGI-based Medicaid | Long-term-care / aged-blind-disabled Medicaid |
|---|---|---|
| Who it covers | Children, adults 19 to 64, parents, pregnant women | Age 65+, blind or disabled, and those seeking nursing-facility or HCBS care |
| Income test | Yes, ACA MAGI methodology | Yes, SSI-based income standard |
| Asset (resource) test | No asset test applied | Yes, generally $2,000 individual / $3,000 couple |
| Main Roth-conversion risk | Conversion-year income spike | The account balance itself as a countable asset |
| Federal source | 42 CFR §435.603(e),(g) | 42 CFR §435.603(j); CRS R43506 |
Roth conversion and Medicare IRMAA: the delayed hit at 65 and older
People age 65 and older can see a Roth conversion raise Medicare premiums about two years later through the income-related monthly adjustment amount, or IRMAA. IRMAA uses a two-year MAGI lookback, so 2026 Part B and Part D surcharges rest on the 2024 tax return (Source: SSA POMS HI 01101.020). It is a cliff: a dollar over a bracket edge raises the whole tier.
The mechanism is the two-year lookback. For 2026, Part B and Part D surcharges are based on the 2024 tax return, or 2023 if 2024 is unavailable (Source: SSA POMS HI 01101.020). That timing lag means a conversion completed in the current year can raise a Medicare premium two calendar years later, after the return reporting it has been filed.
IRMAA is structured as a cliff, not a phase-in. A conversion that pushes MAGI even $1 over a bracket edge raises the surcharge for the entire tier. The 2026 standard Part B premium is $202.90, up $17.90 from $185.00 in 2025 (Source: CMS, “2026 Medicare Parts A & B Premiums and Deductibles”), and the surcharge tiers stack above that base.
| 2026 MAGI, single return | 2026 MAGI, married filing jointly | Total monthly Part B premium |
|---|---|---|
| ≤$109,000 | ≤$218,000 | $202.90 (no IRMAA) |
| >$109,000 to $137,000 | >$218,000 to $274,000 | $284.10 |
| >$137,000 to $171,000 | >$274,000 to $342,000 | $405.80 |
| >$171,000 to $205,000 | >$342,000 to $410,000 | $527.50 |
| >$205,000 to <$500,000 | >$410,000 to <$750,000 | $649.20 |
| ≥$500,000 | ≥$750,000 | $689.90 |
Because IRMAA and Medicaid respond to different tests, a household can face the IRMAA surcharge (an income effect) without any change to long-term-care Medicaid eligibility (an asset effect). The full IRMAA bracket detail is covered in the Q3 Advisors guide to Medicare IRMAA 2026 brackets and premiums.
How the conversion decision fits into broader retirement-tax timing
A Roth conversion is usually weighed against several thresholds in the same year: the ordinary income-tax bracket, the ACA subsidy cliff before 65, Medicare IRMAA after 65, and any Medicaid asset test that may apply later. Because a conversion cannot be reversed under post-2017 rules (Source: IRS Pub 590-B, 2025), the size and sequence of conversions is where planning attention usually goes.
The reason these thresholds interact is that they read different tests in different years. The ordinary tax bracket and ACA subsidy cliff respond to conversion-year income, IRMAA responds to that income two years later, and a Medicaid asset test may apply years afterward on the account balance. A conversion cannot be reversed under post-2017 rules (Source: IRS Pub 590-B, 2025), so each conversion is evaluated against all of these at once.
One neutral way to frame it: a Roth conversion accelerates income today in exchange for tax-free growth and no required minimum distributions on the Roth later, so its effect on any benefit threshold depends on the year it lands and the program’s specific income or asset test. Related thresholds such as required minimum distributions and the net investment income tax can move in the same year, which is why many households model several years at once rather than a single conversion in isolation. The interaction with Social Security taxation is covered in the Q3 Advisors piece on the Social Security tax torpedo.
2026 figures that frame the conversion decision
Several 2026 figures set the boundaries around a conversion year. A Roth conversion itself has no income limit; the MAGI phase-outs below apply only to direct Roth contributions, not conversions. The IRA contribution limit is $7,500, the standard deduction is $16,100 single and $32,200 married filing jointly, and the Medicaid asset limit is generally $2,000 individual or $3,000 couple (Source: IRS Notice 2025-67; CRS Report R43506).
| 2026 item | Amount | Source |
|---|---|---|
| IRA contribution limit | $7,500 (up from $7,000 in 2025) | IRS Notice 2025-67 |
| IRA catch-up, age 50+ | $1,100 (total $8,600) | IRS Notice 2025-67 |
| Roth contribution MAGI phase-out, single/HoH | $153,000 to $168,000 | IRS Notice 2025-67 |
| Roth contribution MAGI phase-out, MFJ | $242,000 to $252,000 | IRS Notice 2025-67 |
| Standard deduction, MFJ | $32,200 | IRS Rev. Proc. 2025-32 |
| Standard deduction, single/MFS | $16,100 | IRS Rev. Proc. 2025-32 |
| Medicaid asset limit, individual / couple | $2,000 / $3,000 | CRS Report R43506 |
More detail on the annual limits sits in the Q3 Advisors guide to 2026 retirement contribution limits.
Work with Q3 Advisors
Q3 Advisors is a registered investment adviser focused on retirement tax planning. This article is educational and is not advice; for guidance on your own circumstances, consult a qualified tax or financial professional.
Frequently asked questions
Does a Roth conversion count as income for Medicaid?
For MAGI-based Medicaid (children, adults 19 to 64, parents, pregnant women), yes. A Roth conversion is fully includible in gross income and raises modified adjusted gross income in the conversion year (Source: IRS Pub 590-A, 2025), and MAGI-Medicaid counts that income with no asset test (Source: 42 CFR §435.603, Cornell LII). For long-term-care Medicaid, the asset test, not conversion income, is the main factor.
Will converting my IRA to a Roth protect it from Medicaid spend-down?
No. A conversion changes the account’s tax character, not whether it is a countable asset. Long-term-care Medicaid applies an asset test, generally $2,000 for an individual or $3,000 for a couple (Source: CRS Report R43506), and requires liquidating available resources unless specifically exempt (Source: CRS Report R43506). Converting the same dollars into a Roth IRA leaves an asset of equal value in the household.
Does the Medicaid five-year lookback apply to a Roth conversion?
A Roth conversion is not a gift or transfer of assets to another person, so it is generally not a lookback transfer by itself; the dollars stay in the applicant’s name. Federal rules still require liquidating available resources unless exempt (Source: CRS Report R43506). Whether a retirement account is countable or exempt is state-specific, so confirming treatment requires the applicable state Medicaid manual.
How does a Roth conversion affect Medicare premiums?
A conversion can raise Medicare IRMAA surcharges two years later, because IRMAA uses a two-year MAGI lookback (Source: SSA POMS HI 01101.020). In 2026, single MAGI above $109,000 (or MFJ above $218,000) moves a person off the standard $202.90 Part B premium into a higher tier (Source: SSA POMS HI 01101.020; CMS 2026 fact sheet). IRMAA is a cliff, so $1 over an edge raises the whole tier.
Can a Roth conversion cost me my ACA subsidy before age 65?
It can. Premium-tax-credit MAGI includes conversion income (Source: 26 U.S.C. §36B(d)(2)(B)), and the 400%-of-poverty subsidy cliff returns for tax year 2026 with no repayment cap for years after 2025 (Source: IRS, “Eligibility for the Premium Tax Credit”). A 2026 conversion that lifts MAGI over 400% of the poverty line can end the subsidy and require repaying advance credits.
Are Roth IRA withdrawals counted differently than traditional IRA withdrawals for Medicaid?
Treatment of retirement accounts for long-term-care Medicaid is state-specific and not fixed by a single federal rule. Federal law requires liquidating available resources unless exempt (Source: CRS Report R43506). Some states exempt accounts in required-minimum-distribution or payout status and count only the income stream. Because Roth IRAs have no lifetime RMDs for the owner, that payout-status treatment can differ; the state Medicaid manual controls.
Sources
IRS Publication 590-A (2025), Contributions to Individual Retirement Arrangements. https://www.irs.gov/publications/p590a
IRS Publication 590-B (2025), Distributions from Individual Retirement Arrangements. https://www.irs.gov/publications/p590b
IRS, “Modified adjusted gross income.” https://www.irs.gov/credits-deductions/modified-adjusted-gross-income
IRS Notice 2025-67, 2026 retirement plan limits. https://www.irs.gov/pub/irs-drop/n-25-67.pdf
IRS Rev. Proc. 2025-32, 2026 inflation adjustments. https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
IRS, “Eligibility for the Premium Tax Credit.” https://www.irs.gov/affordable-care-act/individuals-and-families/eligibility-for-the-premium-tax-credit
26 U.S.C. §36B(d)(2)(B). https://www.law.cornell.edu/uscode/text/26/36B
42 CFR §435.603. https://www.law.cornell.edu/cfr/text/42/435.603
CRS Report R43506, Medicaid Financial Eligibility for Long-Term Services and Supports. https://www.everycrsreport.com/reports/R43506.html
CRS Report RL33593. https://www.everycrsreport.com/reports/RL33593.html
SSA POMS HI 01101.020, IRMAA. https://secure.ssa.gov/poms.nsf/lnx/0601101020
CMS, “2026 Medicare Parts A & B Premiums and Deductibles.” https://www.cms.gov/newsroom/fact-sheets/2026-medicare-parts-b-premiums-deductibles
