Traditional vs. Roth IRA

The plain answer

A Traditional IRA and a Roth IRA are two tax treatments for retirement savings. A Traditional IRA may give you a deduction now, then generally taxes withdrawals as ordinary income. A Roth IRA gives you no deduction now, but qualified withdrawals are tax-free.

For 2026, the combined contribution limit is $7,500. That is one shared limit across all of your Traditional and Roth IRAs, not a separate limit for each account.

How it actually works

Question	Traditional IRA	Roth IRA
Do you pay tax before contributing?	You contribute earned income, and an eligible deduction may reduce your taxable income.	Yes. Contributions do not reduce your taxable income.
How is growth taxed each year?	Investment growth is tax-deferred while it remains in the account.	Investment growth is not taxed while it remains in the account.
What happens when money comes out?	Deductible contributions and earnings are generally taxed as ordinary income.	Qualified withdrawals are tax-free.
What income rule matters?	Income and workplace plan coverage can limit whether your contribution is deductible.	Income can reduce or eliminate your ability to contribute directly.

Contribution eligibility and deduction eligibility are different questions. A high income may limit a Traditional IRA deduction without preventing the contribution itself. Roth IRA contribution eligibility has its own income phaseout. See IRA contribution rules for the current thresholds and details.

What this means for you

The core tradeoff is your tax rate now compared with the tax rate you expect when you withdraw the money.

Paying tax now through a Roth IRA can be attractive when your current marginal tax rate is lower than the rate you expect later. Taking an eligible Traditional IRA deduction can be attractive when your current marginal tax rate is higher than the rate you expect later. The value of either choice also depends on whether you qualify for the deduction or Roth contribution.

If you are deciding based on your situation, read who should use a Roth IRA and who should use a Traditional IRA.

Common mistakes

• Treating the $7,500 limit as separate for each IRA type.
• Assuming every Traditional IRA contribution is deductible.
• Assuming a Roth IRA contribution creates a tax deduction.
• Comparing account labels without comparing your current and expected future marginal tax rates.
• Ignoring income rules before making a contribution.

Related pages

• How an IRA works
• IRA contribution rules
• Who should use a Roth IRA
• Who should use a Traditional IRA
• Traditional vs. Roth 401(k)
• The order of operations for your money