Direct Answer
Choose a Roth IRA if your marginal tax rate today is lower than you expect it to be when you withdraw in retirement. Choose a traditional IRA if your rate today is higher. For 2026, the combined IRA contribution limit is $7,500 (under age 50) or $8,600 with the $1,100 catch-up for those 50 and older. Traditional IRA contributions can be fully deductible, partially deductible, or nondeductible, depending on your income and whether you are covered by a workplace retirement plan. Roth IRA contributions phase out between $153,000 and $168,000 MAGI for single filers and between $242,000 and $252,000 for married filing jointly.
Traditional vs Roth IRA: Which One Is Right for Your Tax Situation?
Gate 1: Eligibility
To contribute to any IRA (traditional or Roth), you need earned income at least equal to the amount you contribute. Earned income includes wages, salaries, tips, self-employment income, and non-taxable combat pay. Passive income such as dividends, interest, rental income, and capital gains does not qualify.
The 2026 combined contribution limit across all your IRAs is $7,500 if you are under age 50, or $8,600 if you are 50 or older (a $1,100 catch-up contribution). This cap applies to all traditional and Roth IRAs held in your name combined. Each spouse in a married couple has a separate contribution limit based on their own eligibility.
Roth IRA contributions are subject to income phase-out ranges based on your modified adjusted gross income (MAGI). For single filers, the Roth phase-out begins at $153,000 and the ability to contribute directly is fully eliminated at $168,000 for 2026. For married filing jointly, the phase-out begins at $242,000 and is eliminated at $252,000. For married filing separately (if you lived with your spouse at any point during the year), the phase-out begins at $0 and is eliminated at $10,000. Traditional IRA contributions have no income eligibility limit, regardless of how high your income is.
Excess contributions (amounts above your contribution limit) carry a 6% excise tax per year until corrected. You can correct an excess by withdrawing it, plus any attributable earnings, before the tax filing deadline including extensions for the year the excess was made.
Gate 2: Deduction (Traditional IRA Only)
Whether a traditional IRA contribution reduces your taxable income in the current year depends on whether you (or your spouse) are covered by a workplace retirement plan and your MAGI. A traditional IRA contribution can be fully deductible, partially deductible, or nondeductible depending on these factors. Not all traditional IRA dollars are pre-tax.
If neither you nor your spouse is covered by a workplace retirement plan, your traditional IRA contribution is fully deductible regardless of income.
If you are covered by a workplace plan, the deduction phases out over the following 2026 MAGI ranges:
- Single or head of household: $81,000 to $91,000
- Married filing jointly (you covered by workplace plan): $129,000 to $149,000
- Married filing separately: $0 to $10,000
If you are not covered by a workplace plan but your spouse is, the deduction phases out between $242,000 and $252,000 for married filing jointly.
Above these limits, your traditional IRA contribution is nondeductible. You receive no upfront tax reduction, but the money still grows tax-deferred. Critically, you must track the after-tax basis using IRS Form 8606 to avoid being taxed again on that portion when you withdraw. Ignoring this tracking leads to double taxation on the same dollars.
Gate 3: Tax Rate Comparison
The governing question for choosing between a deductible traditional IRA and a Roth IRA is simple: is your current marginal tax rate higher or lower than your expected marginal rate at the time of withdrawal?
- Current rate higher than future rate: a deductible traditional IRA saves more total tax. The deduction today at the higher rate is worth more than the tax you will pay on withdrawal at the lower rate.
- Current rate lower than future rate: a Roth IRA is better. Pay tax now at the lower rate and owe nothing on qualified withdrawals later.
- Rates equal: a deductible traditional IRA and a Roth IRA produce the same after-tax result, all else being equal.
Two complications make this comparison harder in practice. First, future tax rates are uncertain. Tax law can change, and your effective retirement rate depends on the mix of income you draw: Social Security, pensions, 401(k) distributions, and IRA required minimum distributions all contribute to taxable income. Many retirees find their effective rate in retirement is higher than they expected once multiple income sources stack up.
Second, a Roth contribution and a traditional deductible contribution of the same nominal dollar amount are not equivalent in pre-tax purchasing power. A $7,500 Roth contribution is funded with after-tax dollars, meaning you have already paid tax on that money. A $7,500 deductible traditional contribution is funded with pre-tax dollars, and tax is deferred until withdrawal. If you can fund the tax on a Roth contribution from outside the IRA rather than reducing your contribution, you are effectively sheltering more wealth per nominal limit dollar. See the Roth vs. Traditional Calculator for a worked comparison.
Gate 4: Contribution Cap
Both account types share the same nominal contribution limit, but the after-tax value of that limit differs depending on how you fund the contribution.
A $7,500 deductible traditional IRA contribution reduces your current tax bill by your marginal rate, but every dollar in the account will eventually be taxed on withdrawal. A $7,500 Roth IRA contribution uses after-tax dollars, so the full amount and all growth are permanently sheltered from tax.
At a 22% marginal rate: a $7,500 deductible traditional contribution gives back $1,650 in current tax savings, leaving a net out-of-pocket cost of $5,850. A $7,500 Roth contribution costs $7,500 out of pocket with no current tax reduction. If you contribute the full $7,500 to the Roth and pay the $1,650 tax difference from funds outside the IRA, you are effectively sheltering more wealth in tax-free growth than the same nominal Roth versus traditional comparison suggests.
This distinction matters most when contributions are small relative to your income and you can easily fund the additional Roth cost from other savings. When you cannot fund the tax from outside the IRA, the practical comparison shifts back to the tax rate question in Gate 3.
Gate 5: Flexibility
Roth and traditional IRAs differ substantially in when and how you can access the money, independent of the tax rate question.
Contribution withdrawal: Roth IRA contributions (not earnings) can be withdrawn at any time, at any age, without income tax or penalty. You contributed after-tax dollars, so taking them back creates no taxable event. This makes the Roth contribution balance an accessible reserve if you face an emergency, without the 10% early withdrawal penalty that typically applies to traditional IRA distributions taken before age 59.5.
Earnings withdrawal: Roth earnings must remain in the account for at least five years and until age 59.5 to be withdrawn tax-free. Traditional IRA distributions before age 59.5 are generally subject to both ordinary income tax and a 10% early withdrawal penalty, with limited exceptions such as disability, substantially equal periodic payments, and certain large medical costs.
Required minimum distributions: A traditional IRA requires you to begin taking RMDs at age 73 if you were born between 1951 and 1959, or at age 75 if born in 1960 or later. These mandatory withdrawals create taxable income whether or not you need the funds. A Roth IRA has no RMD requirement during the original owner's lifetime, allowing tax-free compounding to continue indefinitely.
Conversions: You can move traditional IRA money into a Roth IRA through a Roth conversion. The untaxed portion of the converted amount (amounts that were never previously taxed) is generally included in your taxable income for the year of conversion and reported on IRS Form 8606. Conversions are most tax-efficient in years when your income is temporarily low, such as early retirement years before Social Security, pensions, and RMDs begin stacking up.
Gate 6: Coordination
IRA contribution limits are independent of 401(k) and other workplace retirement plan contribution limits. Contributing the maximum to a 401(k) does not prevent you from also contributing to an IRA, though it can affect traditional IRA deductibility as described in Gate 2 above.
Spousal IRA: A non-working or lower-earning spouse can contribute to an IRA based on the working spouse's earned income, as long as the couple files a joint return and combined compensation covers both contributions. This allows a couple to fund two full IRA contributions even when only one spouse has earned income.
Backdoor Roth for high earners: High earners above the Roth income phase-out can still contribute to a Roth IRA through the backdoor Roth strategy. Step one: make a nondeductible contribution to a traditional IRA (there is no income limit on contributing, only on deductibility). Step two: convert the traditional IRA to a Roth IRA. The untaxed portion of the conversion is generally included in taxable income for the year of conversion and reported on Form 8606. The pro rata rule applies: if you hold other pre-tax IRA funds at year-end, a portion of the conversion becomes taxable proportional to the pre-tax share of your total IRA assets. Most practitioners roll pre-tax IRA funds into a 401(k) before executing the conversion to avoid this. The backdoor Roth strategy is legal in 2026.
Social Security and Medicare coordination: Traditional IRA RMDs increase MAGI, which can make more Social Security benefits taxable and can trigger Medicare IRMAA premium surcharges in higher-income retirement years. Roth IRA withdrawals do not increase MAGI and do not affect Social Security taxability or Medicare premiums.
Estate planning: Roth IRA assets passed to heirs are received tax-free. Inherited traditional IRA distributions are taxable as ordinary income to the beneficiary, subject to the 10-year distribution rule for most non-spouse beneficiaries.
For more on how IRAs interact with workplace plans, see the 401(k) Accounts guide, the Investment Accounts hub, and the Investment Account Types overview.
Frequently Asked Questions
What is the 2026 IRA contribution limit?
The combined contribution limit for all traditional and Roth IRAs you hold is $7,500 for those under age 50, or $8,600 for those 50 and older (including the $1,100 catch-up contribution) for 2026. This limit is shared across all your IRAs; you cannot contribute $7,500 to a traditional IRA and another $7,500 to a Roth IRA in the same year. Contributions also require earned income at least equal to the amount you contribute, and Roth IRA contributions are subject to income phase-out limits beginning at $153,000 of modified adjusted gross income for single filers and $242,000 for married couples filing jointly in 2026.
What is the difference between a Roth IRA and a traditional IRA?
The core difference is when your tax benefit occurs. A traditional IRA contribution can be fully deductible, partially deductible, or nondeductible, depending on your income and whether you or your spouse are covered by a workplace retirement plan. Withdrawals in retirement are taxed as ordinary income on amounts that were never previously taxed. A Roth IRA receives no upfront deduction (you contribute after-tax dollars), but qualified withdrawals in retirement, including all growth, are completely tax-free. The Roth also has no required minimum distributions during the original owner's lifetime. The right choice depends primarily on whether your marginal tax rate today is higher or lower than your expected rate at withdrawal.
What is the backdoor Roth IRA and is it still legal?
The backdoor Roth IRA is a two-step strategy for high earners above the Roth income phase-out limit: first, make a nondeductible contribution to a traditional IRA (no income limit applies to contributing, only to deductibility); second, convert that traditional IRA to a Roth IRA. The untaxed portion of the converted amount is generally included in taxable income and reported on Form 8606. The strategy is legal in 2026. The primary risk is the pro rata rule: if you hold other pre-tax funds in any traditional, SEP, or SIMPLE IRA at year-end, a portion of your conversion will be treated as taxable income proportional to the pre-tax share of your total IRA assets, not just the nondeductible contribution you intended to convert. To avoid this, most backdoor Roth practitioners roll pre-tax IRA funds into a 401(k) before executing the conversion.