Roth Conversion & Capital Gains Headroom Planner

In the years between leaving work and claiming Medicare and Social Security, your taxable income is largely a choice. You decide how much to convert from a traditional IRA to a Roth, and how much long-term gain to realize. This planner tells you how much of each fits in a given year before you cross a threshold that costs real money.

It tracks three ceilings at once. The first is your ACA Marketplace MAGI guardrail — a chosen percentage of the federal poverty level, above which premium subsidies and cost-sharing reductions fall away. The second is the top of the ordinary-income bracket you want to stay inside, which caps how much you should convert. The third is the 0% long-term capital gains ceiling, above which realized gains start being taxed at 15%.

The output is the binding constraint, not three separate answers. Additional Roth conversion room is the smaller of your MAGI headroom and your ordinary-bracket room; additional gain-harvesting room is the smaller of your MAGI headroom and your remaining 0% LTCG room. In most FIRE bridge years with Marketplace coverage, the ACA guardrail binds long before the tax brackets do — which is the point the tool is built to make visible.

A sensitivity table then shows what one more decision does: $1,000 and $5,000 of extra conversion, $10,000 of extra gains, and a combined case, each with the resulting MAGI, FPL percentage, and verdict.

It is written for the specific tax situation of an early retiree with a controllable income year, not for people whose income is set by a paycheck.

• Early retirees buying health insurance on the ACA Marketplace, where crossing a subsidy threshold can cost thousands of dollars in a single year.
• Anyone filling a bridge between a final paycheck and age 59½, deciding how much to convert to a Roth each year to reduce future required minimum distributions.
• Investors harvesting long-term capital gains at the 0% federal rate to reset cost basis while taxable income is temporarily low.
• Barista-FIRE and part-time earners whose earned income already consumes part of the guardrail and who need to know what is left.
• Anyone weighing a conversion against gain harvesting in the same year, since both consume the same MAGI headroom.

The planner uses published federal tables for the coverage year you select — the 2026 federal brackets, the 2026 long-term capital gains thresholds, and the prior-year (2025) federal poverty guidelines that Marketplace eligibility for 2026 is actually measured against. Everything runs in your browser.

1. 1.Split income into ordinary and preferential

   Earned income, ordinary dividends and interest, and any planned Roth conversion form ordinary income. Qualified dividends and long-term capital gains are preferential income taxed on their own schedule. A Roth conversion is ordinary income — that is why it consumes bracket room, not gains room.

   ordinary_income = earned_income + ordinary_dividends_and_interest + planned_roth_conversion
   preferential_income = qualified_dividends + long_term_capital_gains

2. 2.Estimate AGI and Marketplace MAGI

   AGI is the sum of the two income types. Marketplace MAGI then adds back items the ACA counts but AGI does not: non-taxable Social Security benefits, tax-exempt interest, and excluded foreign earned income. This add-back is what makes Marketplace MAGI different from the MAGI used for other tax rules.

   agi = ordinary_income + preferential_income
   marketplace_magi = agi + social_security + tax_exempt_interest + excluded_foreign_income

3. 3.Compare MAGI to your federal poverty level guardrail

   The federal poverty level for your household size comes from the prior-year table for your coverage year. Your guardrail ceiling is that figure times the percentage you select (150%, 200%, 250%, 300%, or 400%), and MAGI headroom is whatever is left below it.

   fpl_percent = marketplace_magi / fpl_amount x 100
   guardrail_ceiling = fpl_amount x guardrail_percent
   magi_headroom = guardrail_ceiling - marketplace_magi

4. 4.Compute ordinary-bracket headroom

   Room to the next ordinary bracket is measured in gross dollars: the bracket floor plus the standard deduction, less ordinary income already recognized. Adding the standard deduction converts a taxable-income threshold into the gross income figure you can compare your conversion against.

   ordinary_room = max(0, bracket_floor + standard_deduction - ordinary_income)

5. 5.Compute remaining 0% long-term capital gains room

   Taxable income is AGI less the standard deduction. The 0% LTCG room is the capital gains threshold for your filing status minus that taxable income — so ordinary income, including a Roth conversion, eats into gains room even though it is taxed separately.

   taxable_income = max(0, agi - standard_deduction)
   ltcg_room = ltcg_zero_percent_ceiling - taxable_income

6. 6.Take the binding constraint

   Additional room for each action is the smaller of the relevant tax ceiling and the MAGI guardrail, floored at zero. If MAGI headroom is exhausted, both figures are zero regardless of how much bracket or gains room remains.

   additional_roth_room = max(0, min(magi_headroom, ordinary_room))
   additional_ltcg_room = max(0, min(magi_headroom, ltcg_room))

7. 7.Run the sensitivity table

   The same calculation is repeated with $1,000 more conversion, $5,000 more conversion, $10,000 more gains, and $5,000 more of each, reporting MAGI, FPL percentage, headroom, and a verdict of Safe, Near limit (under $10,000 of headroom), or Above guardrail.

All figures are for a single tax year. Use the coverage year that matches the Marketplace plan year you are planning for.

Filing status

Single or married filing jointly. It selects the standard deduction, ordinary bracket thresholds, and 0% capital gains ceiling used throughout.

Household size

The number of people in your Marketplace household. It sets the federal poverty level figure your guardrail is a percentage of; sizes above eight add a fixed increment per person.

Coverage year

The Marketplace plan year. Eligibility for a coverage year is measured against the prior year’s poverty guidelines, and the planner applies that offset for you.

MAGI guardrail (% of FPL)

The ceiling you want to stay under, chosen from 150%, 200%, 250%, 300%, or 400% of the federal poverty level. Lower percentages preserve cost-sharing reductions; higher ones only preserve premium tax credits.

Earned income

Wages, self-employment income, and other compensation for the year — part-time or consulting income during a bridge year belongs here.

Ordinary dividends and interest

Non-qualified dividends and taxable interest. Taxed as ordinary income and counted against bracket room.

Qualified dividends

Dividends eligible for preferential rates. They raise taxable income and therefore consume 0% capital gains room even though they are not sale proceeds.

Long-term capital gains

Net long-term gains you have realized or plan to realize, including gains from harvesting to reset cost basis.

Social Security income

Social Security benefits, including the portion excluded from AGI. Marketplace MAGI counts the full benefit, so it is added back here.

Tax-exempt interest

Municipal bond interest and similar tax-exempt interest. Excluded from AGI but counted in Marketplace MAGI.

Foreign earned income exclusion

Foreign earned income you exclude from AGI. Also added back for Marketplace MAGI purposes.

Planned Roth conversion

The amount you intend to convert from a traditional account to a Roth this year. It is fully ordinary income and counts toward both MAGI and bracket usage.

The verdict summarises the binding constraint; the remaining figures show which ceiling produced it.

Estimated AGI and Marketplace MAGI

Your projected adjusted gross income, and the ACA-specific MAGI after adding back Social Security, tax-exempt interest, and excluded foreign income.

FPL amount, reference year, and FPL percentage

The federal poverty level for your household size, the guideline year it came from (one year before your coverage year), and your MAGI as a percentage of it.

Guardrail ceiling and MAGI headroom

The dollar MAGI limit implied by your selected FPL percentage, and how far below it you currently sit. Negative headroom means you are already over.

Taxable income and ordinary taxable income

AGI less the standard deduction, and ordinary income less the standard deduction. The first drives capital gains treatment, the second drives bracket position.

Ordinary bracket headroom

Gross ordinary income you could still recognise before reaching the next planning bracket, assuming the standard deduction and no itemising.

0% LTCG ceiling and remaining room

The taxable-income threshold below which long-term gains are taxed at 0% federally, and how much of that room your current income leaves.

Additional Roth conversion room

How much more you could convert without breaching either the MAGI guardrail or the ordinary bracket — the smaller of the two.

Additional LTCG harvest room

How much more long-term gain you could realize without breaching either the MAGI guardrail or the 0% capital gains ceiling.

Action cards and sensitivity table

Plain-language next steps for your position, plus the MAGI, FPL percentage, headroom, and verdict for $1k and $5k more conversion, $10k more gains, and a combined $5k/$5k case.

These are the values behind the "Try example" button: a single filer, household of one, 2026 coverage, holding a 250% FPL guardrail with a conversion already planned.

1. Ordinary income is $12,125 + $1,000 + $8,000 = $21,125. Preferential income is $3,000 + $15,000 = $18,000. AGI is $39,125, and with no add-backs Marketplace MAGI is also $39,125.
2. The 2025 federal poverty level for a household of one is $15,650, so a 250% guardrail sets the ceiling at $39,125 — exactly the MAGI. Headroom is $0 and FPL percentage is 250.0%, a "Near limit" verdict.
3. Taxable income is $39,125 − $16,100 standard deduction = $23,025. The 2026 single 0% LTCG ceiling is $49,450, so $26,425 of 0% gains room remains.
4. Room to the 24% ordinary bracket is $105,700 + $16,100 − $21,125 = $100,675 of gross ordinary income.
5. Despite $26,425 of gains room and $100,675 of bracket room, additional Roth conversion room and additional harvest room are both $0 — the MAGI guardrail is the binding constraint.
6. The sensitivity table confirms it: $1,000 more conversion pushes MAGI to $40,125 and 256.4% of FPL; $10,000 more in gains pushes it to $49,125 and 313.9%. Every scenario reads "Above guardrail".

This is the situation the planner exists to expose. Judged on federal tax brackets alone, this filer looks like they have six figures of conversion room and $26,425 of free capital gains. Judged against a 250% FPL guardrail, they have nothing left this year. If the subsidy cliff matters more than the conversion, the next dollar should wait for January; if the conversion matters more, the honest move is to select a higher guardrail and price what the lost cost-sharing reduction actually costs.

This is a federal, single-year estimator built on published tables. The gaps below are the ones most likely to change a real filing.

• Federal only. State income tax, state capital gains treatment, and state-specific Marketplace rules are not modeled, and state tax can change a conversion decision outright.
• The standard deduction is assumed. Itemised deductions, above-the-line adjustments, QBI, and self-employment tax handling are not included, so the bracket and gains figures shift if your return looks different.
• Marketplace MAGI is approximated as AGI plus non-taxable Social Security, tax-exempt interest, and excluded foreign income. Real Marketplace determinations use household composition and reconciliation rules this tool does not attempt.
• The full Social Security benefit is added back; the planner does not compute the taxable portion of benefits under the separate provisional-income rules.
• Ordinary bracket room is measured to a single planning threshold, not across every bracket, and it assumes ordinary income stacks below preferential income as the federal rules provide.
• Second-order effects are out of scope: net investment income tax, IRMAA surcharges on future Medicare premiums, the 0.9% additional Medicare tax, AMT, and the interaction between conversions and future required minimum distributions.
• Federal poverty guidelines, brackets, and capital gains thresholds are as published for the years shown and can be superseded; ACA subsidy rules in particular have changed repeatedly. Verify the current figures before acting, and treat this as an estimate rather than tax advice — confirm any conversion or harvesting decision with a qualified tax professional.

Marketplace MAGI

The modified adjusted gross income used for ACA premium tax credits and cost-sharing reductions: AGI plus non-taxable Social Security, tax-exempt interest, and excluded foreign earned income. Different from the MAGI used for IRA or Medicare rules.

Federal poverty level guardrail

A self-imposed income ceiling expressed as a percentage of the federal poverty level. Keeping MAGI under 150%, 200%, or 250% preserves progressively richer cost-sharing reductions; the well-known subsidy behavior at 400% concerns premium tax credits.

Roth conversion ladder

Converting traditional balances to Roth across several low-income years, each conversion becoming penalty-free to withdraw after five years. The standard mechanism for accessing retirement money before 59½ during a FIRE bridge.

0% long-term capital gains bracket

Long-term gains are taxed at 0% federally while total taxable income stays below a threshold set by filing status. Realising gains inside that band resets cost basis at no federal tax cost.

Bridge years

The stretch between your last paycheck and the age when Social Security, Medicare, and penalty-free retirement withdrawals begin. Income is unusually controllable in these years, which is what makes conversion and harvesting decisions worth optimizing.

Tax-gain harvesting

Deliberately selling appreciated holdings to realize gains at a 0% rate and immediately repurchasing, raising cost basis without a wash-sale problem — gains, unlike losses, are not subject to wash-sale rules.

• Can I FIRE Yet? CalculatorWork out whether your assets support retirement spending at all, and how many bridge years your cash actually buys.
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• Couples FI PlannerPlan the same bridge for a two-person household with different retirement dates and pension start ages.
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• Roth Conversions vs ACA Subsidies: The Bridge-Year TradeoffHow to price the conversion against the subsidy when both compete for the same headroom.