Roth IRA 5-Year Rules 2026: The December 31 Conversion Clock

The three clocks, side by side

Most articles call it “the Roth 5-year rule”. The text has more than one rule, and they answer different questions.

Sources: 26 U.S.C. 408A(d)(2) and (d)(3)(F) and 402A(d)(2)(B); 26 CFR 1.408A-6 Q&A-2, Q&A-5 and Q&A-7 and 1.402A-1 Q&A-4; Publication 590-B (2025). Last column is our arithmetic.

Two points the shorter articles skip. First, clock 1 is not renewed by later conversions: the regulation says “each Roth IRA owner has only one 5-taxable-year period” for qualified distributions across all of their Roth IRAs. A conversion in 2031 does not reopen the question for a Roth that started in 2026. Second, the Form 8606 instructions count a conversion as a first contribution: a qualified distribution is one “made after the 5-year period beginning with the first year for which a contribution was made to a Roth IRA (including a conversion or a rollover from a qualified retirement plan) set up for your benefit”. For someone who has never funded a Roth IRA, the first conversion starts clock 1 as well as clock 2.

Section 408A(d)(2)(B) also says an employer contribution counts: the period is measured from a year in which the individual, “such individual's spouse, or employer in the case of a simple retirement account ... or simplified employee pension” made a contribution to a Roth IRA for them. A Roth SEP or Roth SIMPLE contribution can therefore start clock 1 before you open anything yourself.

December 31, 2026 or January 1, 2027: the dated table

A calendar-year taxpayer's taxable year ends on December 31, so the choice between a conversion on December 31, 2026 and one on January 4, 2027 (the first Monday of 2027, our arithmetic) is a choice of tax year and of clock year at once. December 31, 2026 is a Thursday; January 1, 2027 is a Friday; April 15, 2027 is a Thursday (our arithmetic).

Sources: 26 CFR 1.408A-4 Q&A-7(a), 1.408A-6 Q&A-2 and Q&A-5(c), 1.408A-3 Q&A-2(b). Dates are our arithmetic from those rules.

The fifth row is the one to check against your calendar. The regulation taxes the conversion “for the taxable year in which the amount is distributed or transferred from the traditional IRA”, and its own example of a December 31, 1998 distribution contributed on February 25, 1999 gives a 10%-tax period beginning “January 1, 1999”. Read together, a rollover that straddles New Year is taxed in the earlier year and starts its clock in the later one. Publication 590-B (2025) adds an ordering sentence for the same case: a conversion whose distribution is in one year and whose contribution is in the next is treated as contributed before the next year's other conversions. A trustee-to-trustee transfer or a redesignation inside one custodian avoids the straddle, because “any converted amount is treated as a distribution from the traditional IRA and a qualified rollover contribution to the Roth IRA” even when it is a transfer (26 CFR 1.408A-4 Q&A-1(c)); the date of the transfer is then both dates.

The last row matters only for someone under the income limit. For 2026, Notice 2025-67 sets the Roth contribution phase-out at $242,000 to $252,000 of modified AGI for joint filers and $153,000 to $168,000 for single filers, and a regular contribution for a year may be made until the return due date without extensions (26 CFR 1.408A-3 Q&A-2(b)). A saver above the range has no regular contribution to make, so for them the first conversion starts clock 1 in the year it is made (our reading). What a January 4, 2027 conversion would not change is the tax: the 10% additional tax is not part of the conversion itself, because section 408A(d)(3)(A)(ii) says “section 72(t) shall not apply” to it. The choice affects when the exposed period ends and which tax year absorbs the income.

Practical limits sit outside the Code. We did not find, in the texts we read, any rule on custodian cut-off times for December 31 transfers; ask your custodian for the last date it will complete a conversion in 2026, because the tax year of the conversion follows the date the money leaves the traditional IRA. Our Roth conversion guide for IRAs that hold illiquid assets covers which value is taxed and why there is no undo, and our year-end tax calendar for non-traded REIT and BDC investors lists the other December 31, 2026 dates.

Worked examples (our arithmetic)

Every example uses assumed figures and the rules above. None is a prediction or a recommendation.

Example A: the cost of a 21-day wait. A taxpayer under 59 1/2 with no Roth money and no basis converts $100,000 of pre-tax IRA money. If the conversion lands on December 15, 2026, the period is 2026 to 2030. A withdrawal of the whole $100,000 on December 31, 2030 owes $10,000 of 10% tax; the same withdrawal on January 2, 2031 owes $0. If the conversion lands on January 5, 2027, the period is 2027 to 2031: a withdrawal on January 2, 2031 owes $10,000, and one on January 4, 2032 owes $0. The wait is 21 days (16 days to December 31 plus 5) and moves the first free date by one year. The tax on the conversion is the same in both cases at the same income, and the example ends once the taxpayer reaches 59 1/2 or an exception applies.

Example B: ordering and the oldest clock. A 56-year-old has a Roth IRA with $30,000 of regular contributions, a 2023 conversion of $100,000 (all taxable), a 2026 conversion of $80,000 (all taxable) and $40,000 of earnings. Under Q&A-8 the order is contributions, then conversions oldest first, then earnings. A $150,000 withdrawal on June 1, 2027 takes the $30,000 of contributions (no tax, no 10%), $100,000 of the 2023 conversion (its period 2023 to 2027 is still open, so $10,000 of 10% tax) and $20,000 of the 2026 conversion (open until 2030, so $2,000): $12,000 in total and no income tax, because the conversions were taxed when made. The same $150,000 on January 3, 2028 owes $2,000, because the 2023 conversion's period ended on December 31, 2027. The earnings are not touched either time.

Example C: one big year or two (tax, not clock). A married couple filing jointly has $300,000 of taxable income before any conversion, in each of 2026 and 2027, an assumption that applies the 2026 brackets of Rev. Proc. 2025-32 to both years because we have not read the 2027 table. On the 2026 table, tax on $300,000 is $57,196 and on $600,000 is $147,538.50, so converting $300,000 in one year adds $90,342.50. Converting $150,000 in each year adds $39,716 twice, $79,432, because the one-year route puts $87,550 of the conversion above $512,450 of taxable income, where the 35% bracket starts, while each $150,000 tranche in the two-year route tops out at $450,000, in the 32% bracket that starts at $403,550 (the 24% bracket runs from $211,400 to $403,550). The two-year route is $10,910.50 lower in this example and costs a second clock: the 2027 tranche is outside its period only on January 1, 2032. Our IRMAA guide and ACA subsidy guide show the other income thresholds a conversion year can cross.

Example D: age 62, clock not yet run. A taxpayer whose first Roth year is 2026 is 62 in 2029 and withdraws $20,000 from a Roth IRA that holds a $100,000 conversion and $30,000 of earnings. The $20,000 comes from the conversion layer; nothing is taxable, and the 10% tax is excused because the owner has reached age 59 1/2. The qualified-distribution clock, which runs to December 31, 2030, matters only once the contributions and conversions are used up and earnings are reached (our arithmetic).

Age 59 1/2: when the clocks stop biting

Sources: 26 U.S.C. 408A(d)(2); 26 CFR 1.408A-6 Q&A-1, Q&A-4 and Q&A-5; Publication 590-B (2025), Early Distributions exceptions. Layout is our reading.

The first-home exception is limited to “a $10,000 lifetime limit” (Publication 590-B). Because withdrawals reach earnings last, many people are well past the clock before a taxable layer matters; the clock bites in four cases: a short horizon, an early withdrawal under 59 1/2, a conversion that is large relative to the contributions in the account, and an heir.

Roth 401(k), Roth SEP and rollovers

The plan's Roth account has its own clock. Section 402A(d)(2)(B) measures it from the first year of a designated Roth contribution “to any designated Roth account established for such individual under the same applicable retirement plan”, with an earlier year counting if the account received a rollover from a designated Roth account in another plan. The regulation says the clock is “determined separately for each plan” and a direct rollover carries the earlier start (26 CFR 1.402A-1 Q&A-4(b)); for a rollover paid to the employee, Q&A-5(c) says “the employee's period of participation under the distributing plan is not carried over to the recipient plan”.

A designated Roth account moved to a Roth IRA is a different case. Section 408A(d)(3)(B) says the conversion paragraph does not apply to a qualified rollover contribution from a designated Roth account, so that rollover carries no clock-2 tax. We found nothing in the texts we read that adds the plan's years to the Roth IRA's clock (our reading, and the item to confirm with your tax preparer if you hold both). A Roth IRA that already exists keeps its own start year, and a rollover is a “contribution” for the first-year test under the Form 8606 instructions, so a rollover into a Roth IRA that you have never funded would start clock 1 for that IRA. A pre-tax 401(k) rolled into a Roth IRA is a conversion and starts clock 2 for the taxed amount (Pub. 590-B). For the plan-side rules on in-plan conversions and the Roth catch-up, see our Roth catch-up guide and backdoor Roth guide.

Inherited Roth IRA

The heir inherits the owner's clock. The regulation says it is “not redetermined when the Roth IRA owner dies” and that the time a beneficiary or a spouse treating the account as their own holds it “includes the period it was held by the decedent”. A beneficiary's inherited Roth IRA has a clock determined “independently of the 5-taxable-year period for the beneficiary's own Roth IRA”, while a surviving spouse who treats the account as their own ends at the earlier of the two clocks.

Publication 590-B (2025) works an example. A Roth IRA owner died in 2025 with $4,000 of regular contributions, a $10,000 conversion made in 2021 and $2,000 of earnings, and no distributions yet. Each of four children inherits one-fourth of each layer; an immediate $4,000 distribution to each is $1,000 of contributions, $2,500 of conversion and $500 of earnings, and “each beneficiary includes $500 in income for 2025” because the distributions came before the end of the applicable period. The 10% additional tax does not apply because the distribution was made on death.

Our example (our arithmetic): an owner makes a first Roth contribution in 2024 and dies in 2026. The qualified period ends on December 31, 2028, so a distribution to the heir on December 31, 2028 is not qualified and one on January 1, 2029 can be. For the withdrawal schedule that applies to every heir, see our inherited IRA 10-year rule guide. Publication 590-B says a Roth IRA's entire interest generally has to be distributed “by the end of the 5th or 10th calendar year, as applicable, after the year of the owner's death” unless an eligible designated beneficiary takes it over a life expectancy.

Three things the text does not say

• “Five years from the conversion date.” The period starts on January 1 of the conversion year, so two conversions two days apart, on December 31, 2026 and January 2, 2027, are a full year apart on the clock (our arithmetic).
• “Each conversion restarts the clock for my earnings.” It does not: the regulation gives one qualified-distribution period for all of your Roth IRAs. Conversions restart only their own 10%-tax period.
• “The 10% penalty comes from section 72(t)(6) or section 408A(c)(5).” We read the Code: the conversion rule is 408A(d)(3)(F), and 72(t)(6) is cited in the regulation for the SIMPLE IRA 2-year rule (26 CFR 1.408A-4 Q&A-4(b)). Section 408A(c)(5) is the rollover-contribution rule, not an inheritance rule.

Verdict: what to settle before December 31, 2026

• You have no Roth money and are under 59 1/2: the first conversion starts both clocks on January 1 of its year. A December 2026 date and a January 2027 date differ by one year on both (our arithmetic).
• You already have a Roth IRA that is more than five years old: clock 1 has run, so the open question for any new conversion is clock 2, which matters only if you expect to withdraw the converted money before age 59 1/2.
• You are 59 1/2 or older: clock 2 does not apply, because age 59 1/2 is an exception; clock 1 matters only for earnings, which come out last.
• You are converting from a 60-day rollover: check the date the Roth IRA receives the money, not the date of the distribution.
• You inherit or leave a Roth IRA: find the year of the owner's first Roth contribution or conversion on the owner's Forms 5498 or 8606; the heir's clock is that year plus five.

What a reader can do with this

• Pull the year of your first Roth money. Check Form 5498 and any Form 8606 for the first year a Roth IRA received a regular contribution or a conversion; that year fixes clock 1.
• List each conversion with its year and taxed amount. Form 8606, Part II, shows the taxed amount of each conversion (the line 18 amounts that Publication 590-B's recapture chart refers to); each year is a separate clock 2.
• Run the two dates. Do the Example A and Example C arithmetic with your own numbers for a December 2026 and a January 2027 conversion, and add IRMAA and 72(t) exceptions to see what each year's income triggers.
• Ask your custodian for its last conversion date in 2026. The tax year follows the date the money leaves the traditional IRA.
• Ask your preparer about the Roth 401(k) rollover. The plan clock and the IRA clock are separate; ask which start year each Form 5498 will show.

FAQ

Sources, read and saved on October 20, 2026: 26 U.S.C. 408A and 402A (Cornell Legal Information Institute); 26 CFR 1.408A-3, 1.408A-4, 1.408A-6 and 1.402A-1 (Cornell/eCFR); IRS Publication 590-B (2025) and Instructions for Form 8606 (2025), the editions for 2025 returns; IRS Notice 2025-67; and Revenue Procedure 2025-32. The taxpayers, balances, dates of withdrawal and the $300,000 taxable-income assumption are ours; all sums and dates are our arithmetic. This is analysis of public documents, not investment, legal or tax advice.