KEY POINTS
●A Roth conversion is ordinary income in the year you convert.
●A property gift through Meridian Wound Care, LLC is deductible up to 50% of AGI, so a conversion year raises the ceiling.
●Two 2026 rule changes and three items a deduction can’t touch belong in the model.
A conversion is a high-income year you choose
Every dollar you move from a traditional IRA or 401(k) to a Roth is taxed as ordinary income in 2026. For most of my clients, that pushes a large share of the conversion into the 35% and 37% brackets.
| Bracket | Conversion dollars | Federal tax |
|---|---|---|
| 24% | $103,550 | $24,852 |
| 32% | $108,900 | $34,848 |
| 35% | $256,250 | $89,688 |
| 37% | $231,300 | $85,581 |
| Total | $700,000 | $234,969 |
Higher income raises the charitable ceiling
Charitable deductions are limited to a percentage of AGI. When a conversion lifts AGI, the ceiling rises with it, so a larger gift can be deducted in the same year.
BEFORE · AGI $350,000
Cash to a public charity (60%)$210,000
Property gift through Meridian Wound Care, LLC (50%)$175,000
Long-held property at fair market value (30%)$105,000
AFTER · AGI $1,050,000
Cash to a public charity (60%)$630,000
Property gift through Meridian Wound Care, LLC (50%)$525,000
Long-held property at fair market value (30%)$315,000
A property gift through Meridian Wound Care, LLC is deductible up to 50% of AGI. Higher AGI this year means a higher ceiling.
Illustrative household: $350,000 AGI before the conversion. Amounts over the limit carry forward five years.
| Type of gift to a public charity | Annual limit (share of AGI) |
|---|---|
| Cash | 60% |
| Property gift through Meridian Wound Care, LLC | 50% |
| Long-held appreciated property, at fair market value | 30% |
| Amounts over the limit | Carried forward up to 5 years |
“A Roth conversion is one of the few times a client chooses to have a big income year. That is exactly when the charitable conversation belongs on the table.”TETrent Ericson, CPA, Legacy CPAs
Two 2026 changes to model
The new law trims the value of itemized deductions for top-bracket filers and adds a small floor before charitable gifts count.
2025 rules (37% value)$37,000
2026 rules (value capped at 35%)$35,000
What a deduction does not fix
A charitable deduction lowers taxable income, not AGI. Anything keyed to AGI or MAGI still sees the full conversion.
| Item | Lowered by a charitable deduction? | Why it matters |
|---|---|---|
| Taxable income | Yes | The deduction is an itemized deduction. |
| AGI | No | The conversion stays in AGI, which drives the items below. |
| Medicare IRMAA | No | Uses MAGI from two years earlier. 2026 income sets 2028 premiums. 2026 surcharges start above $218,000 joint. |
| 3.8% NIIT | No | Conversion income raises MAGI above $250,000 joint, which can pull investment income into the tax. |
| State income tax | Depends | States differ on charitable deductions and the new federal limits. |
70½ OR OLDER?Compare a qualified charitable distribution. In 2026 you can send up to $111,000 per person directly from an IRA to charity. It never enters AGI, so the 0.5% floor and 35% cap don’t apply.
Two examples: the same year, with and without a gift
Example A uses the full 50%-of-AGI ceiling. Example B uses part of it. AGI stays the same in both columns; only taxable income moves.
EXAMPLE A
A $700,000 conversion, gift at the full 50% ceiling
Business owners, both 63. $350,000 of other income and $50,000 of other itemized deductions.
| Without the gift | With a $525,000 property gift | |
|---|---|---|
| AGI | $1,050,000 | $1,050,000 |
| 50% of AGI ceiling | $525,000 | $525,000 |
| Charitable deduction (after 0.5% floor) | $0 | $519,750 |
| Taxable income (after 35% cap) | $1,002,703 | $495,455 |
| Top bracket reached | 37% | 32% |
| Total federal tax | $293,165 | $111,458 |
Without the gift
With the gift
ESTIMATED FEDERAL TAX DIFFERENCE−$181,707
DELIVERED TO PATIENTS$525,000of wound care product, at appraised value
WHAT IF · HYPOTHETICALAssumes appraised value of 5 times the contribution
Hypothetical contribution (estimated cost of the gift)$105,000
Estimated federal tax difference$181,707
Estimated after-tax difference+$76,707
Hypothetical only. The 5:1 ratio is an assumption for illustration, not a quote, projection or promise. Your contribution, the appraised value and any tax result are set by Meridian Wound Care’s offering documents and may differ. The IRS may challenge the valuation, which could reduce or eliminate the deduction and result in tax, interest and penalties. Past or illustrated results do not guarantee future outcomes.
EXAMPLE B
A $400,000 conversion, gift at part of the ceiling
A physician couple, 61 and 59. $300,000 of other income and $40,000 of other itemized deductions.
| Without the gift | With a $150,000 property gift | |
|---|---|---|
| AGI | $700,000 | $700,000 |
| 50% of AGI ceiling | $350,000 | $350,000 |
| Charitable deduction (after 0.5% floor) | $0 | $146,500 |
| Taxable income | $660,000 | $513,500 |
| Top bracket reached | 35% | 35% |
| Total federal tax | $168,539 | $117,264 |
Without the gift
With the gift
ESTIMATED FEDERAL TAX DIFFERENCE−$51,275
DELIVERED TO PATIENTS$150,000of wound care product, at appraised value
WHAT IF · HYPOTHETICALAssumes appraised value of 5 times the contribution
Hypothetical contribution (estimated cost of the gift)$30,000
Estimated federal tax difference$51,275
Estimated after-tax difference+$21,275
Hypothetical only. The 5:1 ratio is an assumption for illustration, not a quote, projection or promise. Your contribution, the appraised value and any tax result are set by Meridian Wound Care’s offering documents and may differ. The IRS may challenge the valuation, which could reduce or eliminate the deduction and result in tax, interest and penalties. Past or illustrated results do not guarantee future outcomes.
“In both cases the conversion is still fully taxable. The 50% ceiling sets how much the family can give back that year, and the return reflects it.”Trent Ericson, CPA, Legacy CPAs
A GOOD FIT IF YOU
✓Are roughly 55 to 72 with a large pre-tax IRA or 401(k)
✓Own a business or practice and plan to convert this year
✓Itemize deductions
✓Work with a CPA who will review the plan
WHAT TO MODEL WITH YOUR CPA
□The 2026 cap on itemized deduction value for the top bracket
□The 0.5%-of-AGI floor on charitable deductions
□The deduction does not reduce AGI, so Medicare IRMAA and the 3.8% NIIT still apply
□State tax conformity
□If 70½ or older, compare with a qualified charitable distribution (QCD)
Key dates
Dec 10The 2026 initiative closes
Dec 31Conversion must be completed
Apr 15, 20272026 return and balance due
Book a 15-minute call (bring your CPA).
We'll walk through how a gift of property fits your year-end plan. The 2026 initiative closes December 10.
Sources and assumptions2026 brackets and standard deduction: IRS Rev. Proc. 2025-32.0.5% floor and 35% value cap: One Big Beautiful Bill Act (2025), effective 2026.IRMAA: CMS 2026 Part B premiums; first tier above $218,000 MAGI for joint filers.QCD limit: IRS Notice 2025-67.All examples are illustrative, use federal tax only, and assume married filing jointly.