Quick answer
With a traditional IRA, contributions may be tax-deductible and withdrawals are generally taxed. With a Roth IRA, contributions are not deductible, but qualified withdrawals — including earnings — are tax-free [1]. For 2026, the IRS limit across both types is $7,500 [2].
Key points
- Both are US accounts; the choice is mostly about when you pay income tax.
- Traditional: possible deduction now, taxable withdrawals later.
- Roth: no deduction now; qualified withdrawals, including earnings, are tax-free.
- If your tax rate is the same now and later, the two can end up equal; the difference comes from changes in your rate.
- For 2026 the combined IRA limit is $7,500, plus a $1,100 catch-up from age 50.
#What is an IRA?
An IRA — Individual Retirement Arrangement — is a US tax-advantaged account you open yourself, usually at a bank or brokerage, rather than through an employer. You need taxable compensation, such as wages, to contribute [3]. Inside the account you choose your own investments, so the balance can rise or fall. The two main types are the traditional IRA and the Roth IRA. They share the same annual contribution limit; what differs is the tax treatment.
When the tax is paid
Traditional IRA
- Contributions may be deductible
- Growth is tax-deferred
- Withdrawals generally taxed as income
- Required minimum distributions apply
Roth IRA
- Contributions are not deductible
- Growth is not taxed while invested
- Qualified withdrawals are tax-free
- No required withdrawals while the original owner is alive
#How is a traditional IRA taxed?
With a traditional IRA, you may be able to deduct your contributions, which lowers your taxable income for that year. The IRS says amounts in a traditional IRA, including earnings, "generally aren't taxed until distributed to you" [1]. When you withdraw in retirement, the IRS says any deductible contributions and earnings you take out are taxable [3]. Whether a contribution is deductible depends on your income and on whether you (or your spouse) are covered by a workplace plan such as a 401(k) [2].
Traditional IRAs also come with required minimum distributions: from a certain age, the law requires you to withdraw a minimum amount each year, and the IRS currently states that age as 73 [4].
#How is a Roth IRA taxed?
A Roth IRA flips the order. The IRS states plainly: "You cannot deduct contributions to a Roth IRA" [5]. In exchange, qualified distributions are tax-free. According to the IRS, distributions that are a return of your contributions are not taxed, and earnings are also not taxed in a qualified distribution — for example, one made after age 59½ and after the 5-year period beginning with the first tax year for which a contribution was made to the Roth IRA [1].
Two more Roth features matter for planning. You can keep contributing at any age if you have compensation [5], and the IRS notes "You can leave amounts in your Roth IRA as long as you live" — no required withdrawals for the original owner [5]. The catch is income: the ability to contribute to a Roth IRA phases out above certain income levels [2].
#What are the IRA limits for tax year 2026?
The IRS announced that the IRA contribution limit for 2026 is $7,500, up from $7,000 for 2025, and the catch-up for people aged 50 and over is $1,100 [2]. The limit applies to your traditional and Roth IRAs combined, not to each one. The table shows the 2026 income ranges the IRS published in the same release.
| Item | Filing status / situation | 2026 figure |
|---|---|---|
| Contribution limit (traditional + Roth combined) | Under 50 | $7,500 |
| Catch-up contribution | Age 50 and over | $1,100 extra |
| Roth IRA contribution phase-out | Single or head of household | $153,000–$168,000 |
| Roth IRA contribution phase-out | Married filing jointly | $242,000–$252,000 |
| Traditional IRA deduction phase-out | Single, covered by a workplace plan | $81,000–$91,000 |
| Traditional IRA deduction phase-out | Married filing jointly, contributor covered by a workplace plan | $129,000–$149,000 |
| Traditional IRA deduction phase-out | Married filing jointly, contributor not covered but spouse is | $242,000–$252,000 |
#Which one leaves more money after tax?
It depends on your tax rate when you put money in compared with when you take it out. The worked example below uses assumed numbers only: a flat 22% tax rate today, a steady 6% yearly return for 30 years, and three possible tax rates in retirement. Real returns vary year to year and can be negative, and real tax rates depend on your income and the law at the time.
Worked example
Worked example: same $5,000 of pre-tax pay
Assumptions (not forecasts): $5,000 of pre-tax income set aside; tax rate today 22%; 6% return a year for 30 years (growth factor 1.06^30 = 5.7435). Traditional: the full $5,000 goes in deductible. Roth: tax is paid first, so $5,000 × (1 − 0.22) = $3,900 goes in. Calculated with Python.
- Traditional balance before tax (5,000 × 5.7435)
- $28,717.46
- Roth balance, tax-free if qualified (3,900 × 5.7435)
- $22,399.62
- Traditional after tax if retirement rate is 22%
- $22,399.62 — equal to Roth
- Traditional after tax if retirement rate is 12%
- $25,271.36 — more than Roth
- Traditional after tax if retirement rate is 32%
- $19,527.87 — less than Roth
When the tax rate is the same at both ends, the two accounts finish level. A lower rate in retirement favours traditional; a higher one favours Roth.
All rates and returns are hypothetical. This simple comparison ignores state tax, deduction eligibility, income limits and the fact that someone contributing the full limit to a Roth is putting more after-tax money to work.
After-tax value of the traditional IRA in the example, by retirement tax rate
#How do people weigh the choice?
Because nobody knows their future tax rate, people often look at practical signals instead: whether they qualify for a traditional IRA deduction, whether their income is under the Roth phase-out ranges, and whether they value having no required distributions later [2] [5]. Some split contributions between both types. The 401(k) guide explains how the same traditional-or-Roth choice appears inside workplace plans, and how people estimate a savings goal covers the bigger picture. This page is general education, not tax advice for your situation.
Common beginner mistakes
Thinking each IRA has its own $7,500 limit
For 2026 the $7,500 limit (plus any catch-up) covers all your traditional and Roth IRAs together.
Ignoring the income ranges
Contributing to a Roth IRA when your income is above the phase-out range can create an excess contribution. Check your income against the IRS range for the right tax year.
Assuming all Roth withdrawals are tax-free
Earnings are tax-free only in a qualified distribution, which has age and 5-year conditions [1]. Withdrawals before age 59½ can also face an additional 10% tax unless an exception applies [6].
Reusing last year's numbers
The 2025 limit was $7,000; for 2026 it is $7,500. Income ranges also move. Always match the figure to the tax year.
What's the bottom line?
Traditional and Roth IRAs hold the same kinds of investments under one shared limit — $7,500 for 2026. The real difference is timing: deduct now and pay tax later, or pay tax now and take qualified withdrawals tax-free. With equal tax rates the outcome can be the same; with different rates, one comes out ahead. Next, see how traditional accounts eventually require withdrawals in required minimum distributions.
Frequently asked questions
Can I have both a traditional and a Roth IRA?
Yes. You can hold both, but your total contributions across all your IRAs for the year must stay within the single annual limit — $7,500 for 2026, before any catch-up.
Is a Roth IRA the same as a Roth 401(k)?
No. Both are taxed up front, but a Roth 401(k) is offered through an employer and has the much higher 401(k) limit, while a Roth IRA is opened on your own and has income limits.
Do Roth IRAs have required minimum distributions?
Not for the original owner while they are alive, according to the IRS. Beneficiaries who inherit a Roth IRA do have distribution rules.
Does a traditional IRA always give me a deduction?
No. If you or your spouse are covered by a workplace retirement plan, the deduction phases out above certain income levels, which the IRS publishes for each tax year.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- Internal Revenue Service. Topic no. 451, Individual retirement arrangements (IRAs) (2026). Accessed 2026-10-03.A
- Internal Revenue Service. 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 (IR-2025-111) (2025). Accessed 2026-10-03.A
- Internal Revenue Service. Traditional and Roth IRAs (2026). Accessed 2026-10-03.A
- Internal Revenue Service. Retirement topics - Required minimum distributions (RMDs) (2026). Accessed 2026-10-03.A
- Internal Revenue Service. Roth IRAs (2026). Accessed 2026-10-03.A
- Internal Revenue Service. Retirement topics - Exceptions to tax on early distributions (2026). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
