Tax Planning Guide — Connecticut
Roth Conversion Strategy for Connecticut Residents: Is 2025 Your Window?
Connecticut's tax treatment of IRA distributions is changing — and it changes completely in 2026. For pre-retirees with $1 million or more in retirement savings, understanding this timeline may be one of the most consequential planning decisions before you retire.
Key Takeaways
What Connecticut Residents Need to Know
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1
Connecticut currently taxes IRA distributions as ordinary income. Beginning January 1, 2026, IRA distributions become fully exempt from Connecticut state income tax — a significant shift for retirees drawing down large balances.
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2
A Roth conversion in 2025 triggers Connecticut state income tax on converted amounts now — before the exemption takes effect. Whether that trade-off is worthwhile depends on your specific income, bracket, timeline, and goals.
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3
Federal tax brackets, Medicare IRMAA surcharges, and Social Security provisional income rules all interact with a conversion — making the analysis more complex than it first appears.
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For many high-net-worth pre-retirees in Connecticut, a partial, multi-year conversion strategy — converting enough each year to stay below key income thresholds — tends to be more tax-efficient than a single large conversion. Individual results vary significantly.
The Context
Connecticut's IRA Tax Exemption: What's Changing and When
A Roth conversion strategy for Connecticut residents has always required careful planning — but right now, there is a specific legislative timeline that makes the next year or two especially worth examining.
Connecticut has historically taxed IRA and 401(k) distributions as ordinary income. The state has been phasing in broader retirement income exemptions over several years. As of 2025, the pension and annuity income subtraction has increased to 75% for eligible recipients. But the full exemption on IRA distributions is not scheduled to take effect until January 1, 2026.
That means traditional IRA distributions taken in 2025 remain subject to Connecticut state income tax. When you convert a traditional IRA to a Roth IRA, the converted amount is treated as ordinary income in the year of conversion — including for state tax purposes.
This creates a genuine question: if IRA money will be state-tax-exempt in 2026 and beyond, does it make sense to trigger that state income tax in 2025 by converting? The answer depends on several factors — and understanding each of them is what this guide is designed to help with.
CT Retirement Income Tax Timeline
Through 2024
Pension and annuity subtraction at 50% for eligible recipients. IRA distributions taxable as ordinary income. Social Security exempt above certain AGI thresholds.
2025
Pension and annuity subtraction increases to 75% for eligible recipients. IRA distributions remain taxable at the state level. Roth conversions trigger state income tax on converted amounts.
2026 and Beyond
IRA distributions scheduled to become fully exempt from Connecticut state income tax. Roth IRA qualified withdrawals also remain exempt. A meaningful benefit for retirees drawing down substantial IRA balances.
Source: Connecticut General Statutes. Tax law is subject to change. Consult a tax professional for guidance specific to your situation.
The Core Trade-Off
Does a Roth Conversion Still Make Sense Before 2026?
The 2026 IRA exemption changes the math — but it does not automatically make conversions unwise. Here are the factors that may still favor a conversion for many Connecticut pre-retirees.
Federal Taxes Still Apply After 2026
Connecticut's 2026 exemption eliminates state tax on IRA withdrawals — but federal income tax still applies to every traditional IRA distribution you take in retirement. Converting while in a lower federal bracket today may reduce your lifetime federal tax burden, regardless of the CT exemption. The federal dimension often outweighs the state-level consideration for high-balance accounts.
RMDs Force Taxable Income at 73
Required Minimum Distributions begin at age 73 under current federal law (SECURE 2.0). For those with $1 million or more in a traditional IRA, RMDs can push total income into higher federal brackets, trigger taxation of Social Security benefits, and elevate Medicare premiums. Roth IRAs are not subject to RMDs during the owner's lifetime, offering more flexibility over taxable income in retirement.
The Gap Years Before RMDs Begin
Many pre-retirees in Connecticut retire in their early-to-mid 60s — years before RMDs begin and potentially before Social Security starts. During this period, income may be lower than during working years. This "gap window" is widely considered one of the most favorable periods for partial Roth conversions, as the marginal rate on converted amounts may be lower than it will be once RMDs and Social Security layer in.
Tax Law Uncertainty at the Federal Level
Certain provisions of the Tax Cuts and Jobs Act were scheduled to sunset after 2025, which could push federal marginal rates higher going forward. While the legislative outlook continues to evolve and future changes are not certain, locking in today's known federal rates is a consideration many advisors incorporate into multi-year Roth conversion planning for clients with substantial IRA balances.
Estate and Legacy Planning Benefits
Under current federal law, most non-spouse beneficiaries must distribute an inherited IRA within 10 years. If heirs are in their peak earning years, those distributions could be taxed at high rates. Converting now means heirs may receive tax-free distributions from an inherited Roth IRA — a potentially meaningful wealth transfer benefit to consider alongside your own retirement income picture.
The CT State Tax Cost May Be Lower Than Expected
Connecticut's top marginal income tax rate is 6.99%, applicable at higher income levels. In 2025, the pension and annuity subtraction of 75% means that a portion of qualifying income may already be sheltered. The effective CT state tax cost of a 2025 conversion — depending on your income composition — may be more manageable than it first appears, particularly when weighed against long-term federal tax planning considerations.
A Critical Variable
Medicare IRMAA: The Hidden Cost of a Large Conversion
One of the most frequently overlooked consequences of a Roth conversion is its effect on Medicare premiums — specifically the Income-Related Monthly Adjustment Amount, or IRMAA.
Medicare Part B and Part D premiums are based on your Modified Adjusted Gross Income (MAGI) from two years prior. A large conversion in 2025 could increase your 2027 Medicare premiums — potentially by hundreds of dollars per month, per person.
As of 2025 thresholds, exceeding the first IRMAA tier can add approximately $70 per month per person in Part B surcharges alone, with higher tiers adding significantly more. For a married couple, the combined annual cost of a single IRMAA tier breach can be meaningful — and the surcharge applies for the full calendar year in which it is triggered.
This is why partial, multi-year conversions — moving just enough each year to stay below a specific IRMAA threshold — are a common strategy for pre-retirees with substantial IRA balances. The goal is to gradually shift assets into a Roth while managing both federal bracket exposure and Medicare premium costs across multiple years.
The interaction between conversion amounts, MAGI thresholds, Social Security provisional income calculations, and Connecticut state income tax requires careful, coordinated analysis. This is not a back-of-envelope calculation — and it is precisely why integrated planning across tax, income, and Medicare variables matters for this decision.
2025 Medicare IRMAA Surcharge Tiers (Part B, Approximate)
| Individual MAGI | Joint MAGI | Part B Add-On / mo. |
|---|---|---|
| Up to $106,000 | Up to $212,000 | Standard (no surcharge) |
| $106,001 – $133,000 | $212,001 – $266,000 | +$70.00 |
| $133,001 – $167,000 | $266,001 – $334,000 | +$176.00 |
| $167,001 – $200,000 | $334,001 – $400,000 | +$286.00 |
| $200,001 – $500,000 | $400,001 – $750,000 | +$363.00 |
| Over $500,000 | Over $750,000 | +$396.00 |
Source: CMS Medicare IRMAA thresholds, 2025. Surcharges apply two years after the income year. Figures are per person; married couples each pay separately. Subject to annual adjustment. Not a substitute for professional advice.
A Framework for Decision-Making
When a Roth Conversion May Make Sense — and When It May Not
This framework is meant to help structure your thinking — not substitute for a personalized analysis. Every situation involves trade-offs that vary significantly by individual circumstances.
Conversion May Be Worth Analyzing If...
You are in a lower-income year — retired but not yet taking Social Security or RMDs — creating a temporary window of reduced taxable income.
Your traditional IRA balance is large enough that projected future RMDs would push you into a meaningfully higher federal bracket.
You have outside funds available to pay the tax on the conversion, so the full converted amount remains invested in the Roth account.
You have a long retirement time horizon where tax-free Roth compounding has time to potentially offset the upfront tax cost of converting.
Reducing the taxable income burden on heirs — who face a 10-year distribution window for inherited traditional IRAs — is a meaningful goal.
Conversion Requires Extra Caution If...
The converted amount would push your MAGI above an IRMAA threshold, triggering Medicare premium surcharges that persist for a full year — two years after the conversion.
Converting would cause a meaningfully larger portion of your Social Security benefits to become federally taxable, increasing your effective overall tax rate.
You plan to draw on the IRA balance primarily in the near term for living expenses, leaving limited time for Roth tax-free growth to offset the conversion's upfront cost.
You would need to use funds from inside the IRA to pay the conversion tax itself — reducing the invested balance and diminishing the long-term benefit of converting.
CT's 2026 IRA exemption is projected to cover the vast majority of your retirement income needs, making the state-level cost of not converting relatively low — and the benefit of converting harder to justify on state tax grounds alone.
The Skinner Approach
An Integrated Tax and Retirement Income Strategy
At Skinner Wealth Strategies, we work specifically with pre-retirees and retirees who have $1 million or more in retirement savings. Roth conversion decisions do not exist in isolation — they connect directly to Social Security timing, income distribution sequencing, Medicare planning, and estate goals.
Brian Skinner, CFP® and CRPC®, brings together investment management, tax-sensitive income planning, and retirement transition strategy in one cohesive approach. Rather than reviewing each decision in a silo, our process examines how each move affects the full picture of your retirement income — across both the state and federal tax landscape.
Connecticut's 2026 IRA exemption is a meaningful development — but whether it favors or argues against a Roth conversion in your specific case requires analysis of your balances, income sources, timeline, and goals. We help clients work through that analysis in plain language, without jargon or cookie-cutter answers.
Credentials
CFP® — Certified Financial Planner
The CFP® designation reflects comprehensive training in retirement, tax, investment, and estate planning strategy.
Credentials
CRPC® — Chartered Retirement Planning Counselor
Specialized post-retirement income planning expertise, including distribution strategies and tax-sensitive sequencing.
Focus
Pre-Retirees and Retirees 50+ in Connecticut
Serving clients in Milford, Fairfield, and across Fairfield County with $1M+ in retirement savings.
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