This response is lengthy and probably contains information you already know. But I'm posting for the benefit of others reading this thread to. So please bear with me.
First, the 2018 tax brackets for someone who is filing single only. The basics here do apply to those not filing single. But I'm trying to "keep it simple" here for the sole purpose of educating folks on this.
$0 to $9,525 is taxed at 10%
$9,526 to $38.700 is taxed at 10% on the first $9.525 and 12% for the amount over that.
$38,701 to $82,500 is taxed at 10% on the first $9,525, 12% on the next $29,174 and 22% on the amount over that.
$82,501 to $157,500 is taxed at 10% on the first $9,525, 12% on the next $29,174, 22% on the next $74,999 and 24% on the amount over that.
Okay, the above four tax brackets are enough to work with here for my purposes.
Lets say before you convert anything that your taxable income is $75,000. Using the above formulas, your taxes on $75,000 of taxable income will be
$925.50 on the first $9,525 (10%)
$3500.88 on the next $29.174 (12%)
$7,986 on the remaining $36,301 (22%)
Total tax liability is $12,412.38
Now lets convert $25,000 of a traditional IRA to a ROTH. Total taxable income is now $100,000. Taxes on the converted amount that puts my taxable income over $82,500 is taxed at 24%. I'd be better off converting only $7,500 this year as that would put my taxable income right on the mark at $82,500 and it's only taxed at 22%.
Then in 2019 I will wait and "work the numbers" at year end to see what I can convert and still keep myself in the same tax bracket I would be in, if I did not convert.
