Hey Reader,

There is a tax planning opportunity available to most Americans right now that has a hard expiration date attached to it.

Most people are not aware it exists. The ones who are — and who act on it deliberately over the next few years — will likely save tens of thousands of dollars in taxes over their lifetime.

Here is what it is and exactly who should be paying attention.

The Tax Cuts and Jobs Act Sunset

In 2017 Congress passed the Tax Cuts and Jobs Act — the most significant overhaul of the US tax code in decades. Among its most impactful provisions were significant reductions to individual federal income tax rates across nearly every bracket.

Those reduced rates are scheduled to expire at the end of 2025 — meaning the 2026 tax year and beyond could see rates revert to their pre-2017 levels unless Congress acts to extend them.

For most W-2 employees and retirees that means the tax bracket you are in right now may be lower than the bracket you will be in within the next few years — through no change in your income whatsoever.

The 22 percent bracket you are in today could become 25 percent. The 24 percent bracket could become 28 percent. The 32 percent bracket could become 33 percent.

The window between now and a potential rate increase is one of the most valuable tax planning opportunities most Americans will ever have access to — and most are letting it close without taking any action.

The Roth Conversion Opportunity

A Roth conversion is the process of moving money from a traditional tax-deferred retirement account — a 401k or traditional IRA — into a Roth account where it will grow completely tax-free and never be subject to required minimum distributions.

You pay ordinary income tax on the amount converted in the year of conversion. That is the cost. The benefit is that every dollar inside the Roth from that point forward grows tax-free permanently — regardless of what tax rates do in the future.

Here is why the current environment creates an unusual opportunity.

If your marginal tax rate is lower today than it is likely to be in the future — either because of the TCJA sunset, because your income will grow, or because your required minimum distributions will eventually push you into a higher bracket — then paying tax on a Roth conversion today locks in today's lower rate on money that would otherwise be taxed at tomorrow's higher rate.

You are essentially prepaying a tax bill at a discount.

A Real Example

Consider a W-2 employee earning $95,000 as a single filer in 2026. After their standard deduction and 401k contributions their taxable income sits at $60,000 — comfortably inside the 22 percent bracket with roughly $16,700 of space before reaching the 24 percent threshold.

They have $150,000 sitting in a traditional IRA from previous employer 401k rollovers.

By converting $16,700 of that traditional IRA to a Roth this year they fill the top of their 22 percent bracket without crossing into 24 percent. They pay $3,674 in federal tax on the conversion today.

If rates revert to pre-TCJA levels next year that same $16,700 would have been taxed at 25 percent when withdrawn in retirement — a tax bill of $4,175.

The saving on that one conversion: $501. Multiplied across several years of strategic conversions the cumulative savings compound significantly.

And that $16,700 now sits in a Roth account growing completely tax-free — with no required minimum distributions forcing withdrawals they did not plan for.

Who Should Be Paying Attention Right Now

This strategy is not for everyone. But it is worth serious consideration if any of the following describe your situation.

You have significant money in traditional tax-deferred accounts — 401k, traditional IRA, SEP IRA, or SIMPLE IRA — that will eventually be subject to required minimum distributions.

You are currently in a lower tax bracket than you expect to be in retirement — either because your income will grow or because RMDs will force taxable withdrawals whether you need the money or not.

You are recently retired and in a lower income year before Social Security and RMDs begin — sometimes called the Roth conversion sweet spot — where your taxable income is temporarily lower than it will be in just a few years.

You are a W-2 employee who has been contributing to a traditional 401k for years and has never considered whether the Roth side of the account deserves more attention going forward.

The Limitation Worth Understanding

Roth conversions are not free. The amount you convert is added to your taxable income in the year of conversion — which means a large conversion can push you into a higher bracket, trigger IRMAA Medicare surcharges, or increase the taxation of your Social Security benefits.

The strategy works best when executed in measured amounts — converting just enough each year to fill your current bracket without crossing into the next one. This is bracket-filling and it requires knowing your numbers before executing.

This is also why the action step this week is not to convert immediately but to calculate your bracket space first.

The Action Step for This Week

Pull up your most recent tax return and identify two numbers.

First — your current taxable income on Line 15.

Second — the top of your current tax bracket. For the 22 percent bracket that ceiling is $103,350 for single filers and $206,700 for married filing jointly in 2026.

The difference between those two numbers is your bracket space — the amount you could convert to a Roth this year without crossing into the next bracket.

Write that number down. That is your Roth conversion budget for 2026.

Whether you act on it this year or simply understand it for the first time — you are now thinking about your taxes the way the people who pay the least have always thought about them.

Not in April. All year long.

Talk soon,

Grant
The Compound View