How does Income Lab calculate where taxes will be paid from for Roth Conversions?
This article will explain how Income Lab calculates where taxes will be paid from when calculating Roth Conversions.
Last published on: October 31, 2025
Taxes are assumed to be paid first from non-portfolio sources, if there are any (earnings, rental income, Social Security income, etc.), then from taxable accounts, then from tax-deferred accounts. In the final case, either withdrawals are grossed up to cover taxes or the amount actually converted to a Roth is less than it might otherwise have been if taxes were not due.
As a reminder, the Income Lab tax engine can be run in one of two ways: from gross to net (where the gross income is set and net-of-tax amounts may vary year to year) or net to gross (where the net amount is set and the grossed-up-for-tax income may vary year to year). The net-to-gross method can be accessed by switching the plan from "How much can I spend?" to "How can I spend $X?" mode.
As a reminder, the Income Lab tax engine can be run in one of two ways: from gross to net (where the gross income is set and net-of-tax amounts may vary year to year) or net to gross (where the net amount is set and the grossed-up-for-tax income may vary year to year). The net-to-gross method can be accessed by switching the plan from "How much can I spend?" to "How can I spend $X?" mode.