Digging in to my Roth conversion strategies, and Pralana is suggesting slightly smaller conversions that what I expect. It seems the culprit is this line item in the metric MRI: "Reduction in itemized/std deduction" which is preventing the conversion from reaching all the way to the top of the tax bracket.
What does this number represent and how is it calculated?
Re: "Pralana is suggesting slightly smaller conversions that what I expect": The column "Limiting Factor" shows you what limited the R/C amount. In your S2 2026, it is the top of the ordinary tax bracket limit you set.
If you look at the right-most columns on the R/C Results Detail, under the columns in the Post-Roth Conversion metrics, you will see the 'headroom' for the various limits you set. In your scenario 2, the headroom in your limiting ordinary tax bracket is $0 in all but a couple of years when the headroom in the LTCG bracket is $0. In 2055, the LTCG bracket you specified is the most constraining limiter, you are over that limit before any R/C and so no RC is performed.
Re: "Reduction in itemized/std deduction" which is preventing": I am glad you asked about this and will assume you don't mind digging into the details.
The Roth Conversion algorithm calculates your taxes without any R/C amount and then iteratively guesses a R/C amount and recalculates taxes to find the R/C amount that hits the top of your lowest constraint (ordinary tax bracket top, LTCG top, etc.).
For the first iteration only: it guesses an initial R/C amount and then, assumes AGI increases by that amount, minus any decrease in Schedule A itemized deductions, to get the initial headroom for each of the various limits you have set. This requires completing the Schedule A calcs using the AGI plus the initial R/C guess and the calc how much itemized deductions decreased. This is the "Reduction in itemized/std deduction" amount you see in the Metric MRI. For your scenario 2, 2026, the initial R/C guess causes itemized deductions to drop by the amount shown in the Metric MRI.
For subsequent iterations: it uses various goal-seeking techniques to converge on the R/C amount that will leave $0 headroom in the most constraining limiter. Each iteration does a full tax recalculation using the iteration's R/C amount until the headroom is near $0.
Thus, the amount shown in the Metric MRI is from the first guess/iteration and is not the actual change in the itemized/standard deductions from the final iteration. I need to either re-label it, remove it, or show the amount from the final iteration which in your case in a far smaller amount because the final R/C amount is a lot less than the initial guess.
Thanks for the explanation. That does make sense to me, but in my case I think my numbers are wonky.
E.g. in my S1 2026 year, an initial guess of ~$2K causes a ~$9K hit to deductions. AFAIK, I'm not near any tax cliffs that would have that kind of impact. But now that I understand what the numbers mean, let me see if I can figure out what is going on.
I'm pretty convinced it's a bug now, sending a bug report.
@tchiers I was able to replicate the issue you reported and have deployed a fix in tonight's release (More > Release Notes). Thank you for bringing this to my attention.
The Schedule A mortgage interest deduction, and the mortgage interest worksheet, are now the same whether Roth conversions are enabled or disabled.
Since you are deep into this, I would appreciate it greatly if you would confirm this is the case. I will leave the feedback item open for a couple of days until you confirm.
This also removes, for at least some of your years, the Metric MRI item "Reduction in itemized/std deduction", though it is still possible that Roth conversion amounts reduce other Schedule A deductions that are subject to AGI limits or phase outs.
