Roth Conversion in New York

A Roth conversion in New York is taxed as ordinary income in the conversion year, at New York’s graduated state rates of 4% to 10.9%, because New York begins from your federal adjusted gross income (AGI) and the converted amount flows straight into it (Source: NY Dept. of Taxation & Finance, “Tax rates and tables,” tax.ny.gov, 2026).

Does New York tax a Roth conversion?

Yes. New York conforms its tax base to federal AGI, so a traditional-IRA or 401(k) conversion that federal law treats as ordinary income lands in your New York taxable income and is taxed at the state’s 4% to 10.9% graduated rates for 2026 (Source: NY Dept. of Taxation & Finance, tax.ny.gov, 2026). New York has no Pennsylvania-style exemption for retirement-plan distributions.

A point that is easy to miss: unlike Pennsylvania, Illinois, or Mississippi, which generally do not tax qualified retirement-plan distributions after retirement age, New York gives no broad exemption. A conversion is not state-tax-free here. The one break available is the pension and annuity income exclusion of up to $20,000 per taxpayer for anyone age 59½ or older, which can shelter part of a conversion sourced from a private plan (Source: NY Dept. of Taxation & Finance, “Information for retired persons,” 2025-2026).

The trade-off matters. Claiming the $20,000 exclusion against conversion income now uses it up for the year, but the qualified Roth distribution you take later is fully tax-free at both the federal and New York levels and does not consume the exclusion. That frees the $20,000 to shelter other income, such as a private pension, in the years you draw it. Our Roth conversion planning service and our state-by-state tax overview walk through how that sequencing works.

Roth conversion New York: an illustrative dollar example

The table below shows an illustrative New York tax cost on a $100,000 Roth conversion for a couple both age 59½ or older, using the confirmed 2026 rate range and the $40,000 joint exclusion. Figures are illustrative only. Your actual marginal rate depends on total taxable income and whether you live in New York City (Source: NY Dept. of Taxation & Finance, tax.ny.gov, 2026).

The ~5.9% rate is a single illustrative figure reflecting one of New York’s middle brackets after the 0.1-point rate reduction in effect for 2026 for taxpayers with taxable income up to $215,400 single or $323,200 joint; a further 0.1 point phases in by 2027 for a full 0.2-point cut (Source: NY Dept. of Taxation & Finance, “Tax rates and tables” and NYS-50-T-NYS (1/26) withholding tables, 2026). The NYC column applies the top city rate of about 3.876% as an upper-bound illustration. Higher total income pushes the state marginal rate toward 10.9%. Federal tax on the same conversion is separate and larger. Our how much to convert and break-even resources model the full federal-plus-state picture.

The cost of waiting: a hypothetical Brooklyn couple

This is a hypothetical illustration, not based on an actual client and not a projection or promise of your result; individual outcomes depend on your own facts. Consider a Brooklyn couple, both 62, with a $1.2 million traditional IRA and no pension income yet. Converting $80,000 a year for several years keeps each year’s conversion inside the lower-to-middle New York brackets while their other income is low, before required minimum distributions (RMDs) begin at age 75 and before Social Security starts. Each year they can apply up to $40,000 of the joint exclusion against the converted amount.

Deferring can look cheaper in the short term, but for some households it is not, because the IRA keeps compounding and later RMDs may be taxed at higher combined rates; for others, for example those who expect lower future tax rates, a shorter time horizon, or a move to a lower-tax state, deferral may cost less. Which is true depends on your own facts, including future tax rates, liquidity needs, and possible law changes. Left untouched, the IRA keeps compounding, and RMDs at 75 can force six-figure withdrawals taxed at New York’s ordinary rates plus NYC tax, push more of their Social Security into federal taxation, and lift their MAGI into higher Medicare IRMAA surcharge tiers. Paying New York tax on measured conversions now, while their bracket is low, may reduce the balance that later drives all three of those costs, though whether it does depends on the household’s own facts. This is educational illustration, not a recommendation.

Does New York tax 401(k) and IRA withdrawals?

Yes, to the extent the distribution is in your federal AGI, but a private retirement-income exclusion softens it. New York allows a pension and annuity income exclusion of up to $20,000 per taxpayer for those age 59½ or older for the full year, up to $40,000 on a joint return, covering IRA, 401(k), and private-pension distributions (Source: NY Dept. of Taxation & Finance, Form IT-201 instructions, line 29, 2025-2026).

Amounts above the exclusion are taxed at ordinary rates. New York does not fully exempt private retirement distributions the way Pennsylvania, Illinois, or Mississippi do. The exclusion has no income cap; the only conditions are age (59½ or older) and source (a non-government plan). If you turn 59½ during the year, only distributions received after that date qualify, still capped at $20,000. A pending bill (2025-S2571A) proposes phasing the exclusion higher in steps toward $40,000, but it has not been enacted, so $20,000 remains the 2026 cap (Source: nysenate.gov, 2025-S2571A).

The New York $20,000 retirement income exclusion, explained

New York’s $20,000 exclusion (per taxpayer, $40,000 joint) subtracts up to that amount of qualifying private pension, IRA, and 401(k) income for filers age 59½ or older, claimed on Form IT-201, line 29 (Source: NY Dept. of Taxation & Finance, “Information for retired persons,” 2025-2026). It applies to both periodic payments and lump sums, and a Roth conversion counts as an eligible distribution.

Two nuances change conversion planning. First, the exclusion is per person, so both spouses age 59½+ each get $20,000, but a spouse who has not reached 59½ for the whole year cannot claim it. Second, using the exclusion on a conversion consumes it for that year. Because the later qualified Roth distribution is tax-free and does not use the exclusion, some households prefer to reserve the exclusion for a taxable private pension and pay the small New York tax on the conversion instead.

Government pension exclusion in New York

New York fully exempts, with no dollar limit, distributions from New York State and local government pension plans, federal government pensions (including military retirement pay), and certain public authorities such as the MTA Police and LIRR plans (Source: NY Dept. of Taxation & Finance, “Information for retired persons,” 2025-2026). This unlimited exemption is separate from, and far larger than, the $20,000 private-plan exclusion.

The distinction is practical for conversion planning. If your steady income is an unlimited-exempt government pension, more of your bracket space stays open in low-income years, which can leave room to convert a traditional IRA at a moderate New York rate. A converted IRA does not become a government pension, so the conversion itself is still ordinary income eligible only for the up-to-$20,000 private exclusion.

Does New York tax Social Security?

No. Social Security benefits that appear in your federal AGI are subtracted when New York computes its own AGI, so they are fully exempt from New York State income tax at every income level (Source: NY Dept. of Taxation & Finance, “Information for retired persons,” 2025-2026). New York City does not tax them either.

The federal side is different and is where a conversion bites. Conversion income raises your combined income for the federal Social Security taxability test, so a large conversion can push up to 85% of your benefits into federal tax even though New York still exempts them. Timing conversions before you claim Social Security, or in years benefits are low, can help limit that federal interaction. See our guide to the taxation of Social Security benefits in 2026.

NYC retirement income tax rate and Roth conversion tax in New York City

New York City residents pay a local income tax on top of state tax, with a top city rate near 3.876%, and it applies to conversion income the same way state tax does (Source: NY Dept. of Taxation & Finance, tax.ny.gov, 2026). Yonkers residents pay a surcharge equal to 16.75% of their New York State tax rather than a separate city rate.

City tax is why a conversion can cost noticeably more inside the five boroughs than in a Westchester or Long Island suburb. Social Security and government pensions stay exempt at the city level, and the $20,000 private exclusion still reduces the base the city taxes, but there is no separate NYC break for a conversion. Retirees weighing where to establish residency sometimes review our note on moving to a tax-friendly state in retirement.

New York IRMAA Medicare surcharge and the AGI ripple

A Roth conversion raises your modified AGI, and Medicare uses MAGI from two years earlier to set Income-Related Monthly Adjustment Amount (IRMAA) surcharges on Part B and Part D. A conversion large enough to cross an IRMAA threshold raises premiums for both spouses two years later, a federal cost that sits alongside New York’s income tax (Source: our 2026 IRMAA brackets and premiums guide).

New York does not impose IRMAA, but the ripple still matters to a New York retiree’s total cost, because the same conversion that New York taxes at 4% to 10.9% can also lift IRMAA tiers and increase federal Social Security taxation. Sizing each year’s conversion to stay under the next IRMAA threshold, while filling a New York bracket, is a common planning constraint.

New York estate tax exemption 2026 and the estate tax cliff

New York has an estate tax and no inheritance tax. For deaths from January 1, 2026 through December 31, 2026, the basic exclusion is $7,350,000, with a top marginal rate of 16% (Source: NY Dept. of Taxation & Finance, “Estate tax,” tax.ny.gov/pit/estate). New York City imposes no separate estate tax.

The infamous cliff is the planning trigger. If a taxable estate exceeds 105% of the exclusion, which is $7,717,500 in 2026, the exclusion vanishes entirely and the whole estate is taxed from the first dollar under NY Tax Law §952. Between $7,350,000 and $7,717,500 only the excess is taxed, so the marginal estate-tax rate in that narrow band can exceed 100%. A Roth conversion can shrink a taxable estate: you pay the income tax now from the IRA, moving those dollars, and the future income tax on them, off your heirs’ plate and out of the estate. See our 2026 estate tax exemption overview. This is educational, not legal or tax advice.

New York part-year resident Roth conversion and residency timing

New York taxes residents on all income, so a conversion is fully taxable to New York if you are a domiciliary or a statutory resident (you keep a permanent place of abode in New York and spend more than 183 days there) in the conversion year (Source: NY Dept. of Taxation & Finance, Form IT-201/IT-203 instructions and TSB-M guidance, 2026).

If you have genuinely established residency in another state before you convert, federal law at 4 U.S.C. §114 bars New York from taxing the retirement-plan distribution of a nonresident; the conversion is then taxed only by your new state of residence in that year. Domicile changes are fact-heavy and New York audits them closely, so the timing of a move relative to a conversion carries real tax weight. This describes the rule; it is not advice to relocate.

Is New York tax friendly for retirees?

New York is mixed for retirees. It fully exempts Social Security and unlimited government pensions, which helps, but it taxes IRA, 401(k), and private-pension income above the $20,000 exclusion at rates up to 10.9%, adds NYC tax up to 3.876%, and carries an estate tax with a hard cliff at $7,717,500 for 2026 (Source: NY Dept. of Taxation & Finance, tax.ny.gov, 2026).

For someone planning a Roth conversion, the takeaway is that New York’s cost is real, and its timing, exclusion, and bracket rules are factors a conversion plan can weigh, though results vary by situation and are not assured. Filling lower brackets in gap years before RMDs and Social Security, using the exclusion deliberately, and staying under IRMAA thresholds are among the factors a plan can consider. Property tax and the STAR program, plus state sales tax, round out the broader retirement picture but do not change how a conversion is taxed.

How Rothology plans a Roth conversion for New York residents

The Rothology Premier Roth Conversion is a flat-fee, fiduciary planning engagement. For a New York or New York City resident, we build a multi-year projection that models the state’s 4% to 10.9% brackets, the $20,000 or $40,000 pension exclusion, city tax where it applies, the federal Social Security interaction, IRMAA thresholds, and the estate-tax cliff, so each year’s conversion is sized against every one of those constraints.

Q3 Advisors is a fiduciary registered investment adviser. We sell no insurance or investment products and earn no commissions; a flat fee for the plan reduces product-based conflicts. We start with a conversation about your goals and your New York tax situation, then show the projected numbers before you decide anything.

Frequently asked questions

Does New York tax Roth conversions?

Yes. New York starts from your federal AGI, so a Roth conversion is ordinary income taxed at New York’s 2026 rates of 4% to 10.9%, plus NYC tax up to about 3.876% for city residents. If you are 59½ or older, up to $20,000 per person ($40,000 joint) may be excluded (Source: NY Dept. of Taxation & Finance, tax.ny.gov, 2026).

Are Roth IRA distributions taxable in New York State?

Qualified Roth IRA distributions are tax-free at both the federal and New York State levels, the same as federally, once the account is at least five years old and you are 59½ or older. Only the conversion that funds the Roth is taxed by New York, in the year you convert (Source: NY Dept. of Taxation & Finance, “Information for retired persons,” 2025-2026).

Does the $20,000 New York retirement exclusion apply to Roth conversions?

It can. A Roth conversion from a private plan counts as an eligible distribution, so up to $20,000 per taxpayer age 59½+ may shelter part of it. Claiming it on the conversion uses the exclusion for that year, while the later qualified Roth distribution is tax-free and does not consume the exclusion (Source: NY Dept. of Taxation & Finance, Form IT-201 line 29, 2025-2026).

Does New York tax Social Security benefits?

No. New York subtracts Social Security benefits from federal AGI, so they are fully exempt from state and city income tax at every income level. A conversion can still increase the share of your benefits taxed federally, though New York’s exemption is unaffected (Source: NY Dept. of Taxation & Finance, “Information for retired persons,” 2025-2026).

Does New York City tax retirement income?

New York City taxes IRA, 401(k), and private-pension income above the $20,000 exclusion, and it taxes Roth conversion income, at a top local rate near 3.876% on top of state tax. The city does not tax Social Security or government pensions (Source: NY Dept. of Taxation & Finance, tax.ny.gov, 2026).

Do I pay New York tax on a Roth conversion if I move out of state?

If you establish residency in another state before converting, federal law 4 U.S.C. §114 bars New York from taxing a nonresident’s retirement-plan distribution, so only your new state taxes it that year. If you are still a New York domiciliary or statutory resident when you convert, New York taxes the full amount (Source: 4 U.S.C. §114; NY Dept. of Taxation & Finance residency rules, 2026).

Sources

• NY Dept. of Taxation & Finance, “Information for retired persons,” tax.ny.gov, 2025-2026.
• NY Dept. of Taxation & Finance, Form IT-201 instructions, pension and annuity income exclusion, line 29, 2025-2026.
• NY Dept. of Taxation & Finance, “Tax rates and tables” and NYS-50-T-NYS (1/26) withholding tax tables, 2026.
• NY Dept. of Taxation & Finance, “Estate tax,” tax.ny.gov/pit/estate, basic exclusion $7,350,000 for 2026; NY Tax Law §952 cliff at 105%.
• NY Dept. of Taxation & Finance, Form IT-203 nonresident/part-year instructions and TSB-M residency guidance, 2026.
• Federal law: 4 U.S.C. §114 (state taxation of nonresident retirement income).
• New York State Senate, Bill 2025-S2571A (proposed increase to the pension and annuity income exclusion; not enacted), nysenate.gov.
• NerdWallet, “New York Income Tax: Rates, Who Pays in 2026,” 2026 (corroborating rate range).