Capital Gains vs. Roth Conversion Flowchart

• Investing & Wealth Management
• IRAs & Roth
• Tax Planning

Last Reviewed: August 2026

Should You Harvest Capital Gains or Complete a Roth Conversion?

Capital gain harvesting and Roth conversions can both reduce future taxes, but they serve different purposes. Choosing the right strategy depends on your income, tax bracket, and long-term retirement goals. In some years, one strategy may provide greater value than the other. In other situations, using both strategies together may make sense.

This flowchart helps you compare these two tax-planning opportunities. It guides you through the key questions that influence which approach may have the lowest tax impact.

How to Use This Flowchart

Begin at the top of the flowchart and answer each question based on your current financial situation. Follow the arrows until you reach a recommendation.

The flowchart considers your taxable income, available tax brackets, and the type of investment accounts you own. It also evaluates whether you have appreciated investments in a taxable brokerage account or pre-tax retirement assets that could benefit from a Roth conversion.

As you work through the flowchart, remember that every tax decision affects your broader financial plan. Harvesting long-term capital gains may allow you to recognize gains at a favorable tax rate. A Roth conversion moves retirement savings into a tax-free account but creates taxable income today.

This flowchart provides educational guidance only. Before making either decision, review your complete tax picture and consider how the strategy may affect future years.

Why This Decision Matters

Tax planning is not just about lowering this year’s tax bill. The goal is often to reduce your lifetime tax liability while creating greater flexibility during retirement.

Many retirees experience years with unusually low taxable income. These years may create opportunities to harvest capital gains at a favorable tax rate or complete a Roth conversion before future tax rates increase. Missing these opportunities could result in higher taxes later.

These strategies may also affect Medicare premiums, Social Security taxation, investment taxation, and required minimum distributions. A decision that saves taxes today may increase costs elsewhere if it is not carefully planned.

Reviewing these strategies as part of a comprehensive financial plan can help you make more informed decisions. Careful planning often produces better long-term results than focusing on a single tax year.