Traditional IRA vs Roth IRA: Decision Guide by Income

Favor Roth when you qualify and expect the tax rate on later withdrawals to be higher than the rate you would pay now. Favor a deductible traditional IRA when the deduction saves tax at a higher rate than you expect to pay on withdrawal. First check eligibility: income and workplace-plan coverage can remove a traditional deduction or restrict direct Roth contributions.

The tables below use federal 2026 limits, checked November 3, 2026. Work through contribution room, modified AGI, and workplace coverage before comparing tax timing. Include state income taxes when estimating the current and future tax cost.

One contribution limit across both account types

The IRS contribution-limit page sets the 2026 combined traditional-and-Roth IRA limit at $7,500, or $8,600 for someone age 50 or older. Taxable compensation can impose a lower limit. These are combined annual regular-contribution limits, not separate allowances at every custodian.

For a hypothetical eligible contributor under 50, $3,000 to a traditional IRA leaves at most $4,500 for a Roth IRA that year. Opening an additional IRA does not create more contribution room. Rollovers follow separate rules and are not ordinary annual contributions.

After choosing the account’s tax treatment, select its investments separately. Compare funds, costs, and the stock-and-bond mix against the money’s time horizon. The same investment can have the same market risk inside either a traditional or a Roth IRA.

Direct Roth eligibility in 2026

The IRS’s 2026 announcement provides these modified-adjusted-gross-income phaseouts:

Filing situation	Full contribution below the phaseout, subject to other limits	Reduced contribution range	No direct Roth contribution at or above
Single or head of household	$153,000	$153,000–$168,000	$168,000
Married filing jointly	$242,000	$242,000–$252,000	$252,000

Married filing separately has special rules. If the person lived with their spouse during the year, the phaseout is generally $0–$10,000. Publication 590-A explains that someone filing separately who did not live with their spouse at any time during the year uses the single-filer Roth range.

Use the IRA-specific modified AGI worksheet, especially near a cutoff. Gross wages, take-home pay, and taxable income are different figures. At the upper endpoint, direct Roth contributions stop; a possible conversion requires the separate basis and tax calculation described below.

Traditional deductibility depends on workplace coverage

A traditional IRA contribution can be permitted without being deductible. When the contributor or spouse participates in a workplace retirement plan, the deduction may phase out. The 2026 IRS ranges are:

Situation	Modified AGI deduction phaseout
Single contributor covered at work	$81,000–$91,000
Joint return; contributing spouse covered at work	$129,000–$149,000
Joint return; contributor not covered but spouse covered	$242,000–$252,000

If neither spouse is covered by a workplace plan, these deduction phaseouts do not apply. Married-filing-separately rules require separate attention. Publication 590-A explains the definitions, calculation and reporting.

For a single employee under 50 with $100,000 modified AGI and workplace-plan coverage, the traditional deduction is unavailable while a full direct Roth contribution remains possible, subject to compensation and the annual limit. Roth is a useful starting comparison here because a nondeductible traditional contribution provides no current deduction. Without workplace coverage, the traditional deduction analysis changes.

Nondeductible contributions need records. They create tax basis that must be tracked so the same contributed money is not taxed again on distribution. The account statement alone may not identify that basis.

Compare tax timing on equal assumptions

A deductible traditional contribution can reduce current taxable income, while later taxable distributions create income. Roth contributions are not deductible, and qualified distributions are excluded from income. Comparing equal nominal deposits can obscure the fact that their current after-tax costs differ.

Here is a simplified hypothetical example with $5,000 of pretax money, a 22% current tax rate and a future investment growth factor of three. Ignore state taxes, fees, annual limits and other tax interactions.

Deductible traditional route: $5,000 grows to $15,000 before withdrawal tax.
Roth route: paying 22% first leaves $3,900 to invest, which grows to $11,700 available under a qualified distribution.
At a 22% withdrawal tax rate, the traditional balance also leaves $11,700.
At a 12% withdrawal rate, it leaves $13,200; at 24%, it leaves $11,400.

In this model, traditional wins at a 12% withdrawal rate, both tie at 22%, and Roth wins at 24%. Estimate the rate that would actually apply to the proposed withdrawal alongside Social Security, pensions, and other income. A large distribution can cross tax brackets, so compare the incremental tax cost.

Use the same investment assumptions on both sides. If a comparison gives one account a higher return or ignores the current tax cost of a Roth contribution, it is no longer isolating tax treatment.

Check withdrawal timing and the Roth five-year rules

Publication 590-B explains that a qualified Roth distribution generally requires the five-tax-year holding period plus age 59½ or another qualifying circumstance, such as death, disability or a qualifying first-home distribution within its lifetime limit. Regular Roth contributions come out before conversions and earnings under the ordering rules.

Conversions have a separate five-year rule concerning potential early-distribution additional tax on taxable converted amounts. It is not the same as the account’s qualified-distribution clock. A person under 59½ should not treat every dollar in a Roth account as immediately accessible without consequences.

Traditional distributions are generally taxable except for the applicable recovery of basis. Early taxable distributions can also incur a 10% additional tax unless an exception applies. The additional tax is not merely a charge on investment earnings in an otherwise fully deductible traditional IRA.

Preserve contribution, conversion and basis records before making withdrawals. An account’s current balance does not reveal which distribution category applies.

Calculate conversion tax across all relevant IRAs

A Roth conversion moves eligible traditional retirement money into a Roth account and generally includes previously untaxed amounts in income. A nondeductible contribution followed by conversion is sometimes called a backdoor Roth, but opening a separate IRA does not isolate after-tax basis from other traditional IRA money.

The Form 8606 instructions explain reporting and the aggregation of traditional IRAs, including traditional SEP and SIMPLE IRAs, for the relevant calculation. Year-end values and distributions matter. Use the applicable tax-year form; the linked instructions available at this review are the 2025 edition.

For a hypothetical no-growth example, assume $92,500 of pretax IRA money plus a $7,500 nondeductible contribution. A $7,500 conversion leaves $92,500 in the traditional IRAs at year-end. With no other distributions or basis adjustments, the basis ratio is $7,500 divided by $100,000, or 7.5%. Of the $7,500 converted, approximately $562.50 is basis recovery and $6,937.50 is taxable.

For this example, budget for income tax on $6,937.50 of the conversion. Gather all relevant IRA balances and prior Form 8606 basis records before calculating the amount. If considering a transfer of pretax IRA money to an employer plan, check the plan’s acceptance rules and the resulting tax treatment first.

Required distributions and the final decision worksheet

Original Roth IRA owners have no lifetime required minimum distributions; beneficiaries follow separate rules. Traditional IRA starting ages depend on birth year. The IRS distribution regulations assign age 75 to people born in 1960 or later. The IRS RMD guidance covers current administration for those reaching the applicable starting age.

Before choosing, record the contribution year, age, filing status, taxable compensation, relevant modified AGI, workplace coverage and contributions already made. Then identify whether a deduction is available, whether direct Roth eligibility is reduced and whether existing IRA basis or pretax balances affect a contemplated conversion.

If both options are available, compare today’s deduction with several plausible withdrawal tax rates. Roth provides tax-free qualified withdrawals; deductible traditional contributions preserve more pretax money to invest today. Choose the treatment that fits the tax comparison, and revisit it when income or workplace coverage changes.