Roth or Traditional? Compare Tax Now With Tax Later
Roth and traditional IRAs differ mainly in when you pay tax; compare your tax rate now with your rate later, and check the 2026 IRS income limits.
A traditional IRA and a Roth IRA can hold exactly the same investments. The difference is when the tax is paid. With a traditional IRA, a contribution may be deductible now and withdrawals are taxed later. With a Roth IRA, you contribute money that has already been taxed and qualified withdrawals come out tax-free. Comparing the two mostly means comparing your tax rate today with the rate you expect when the money comes out, and nobody knows that second number for certain.
This guide explains the arithmetic and the federal rules for the 2026 tax year. The worked example uses invented figures and an assumed return, not a forecast. State income taxes can change the comparison and aren’t covered here.
What each account does with tax
The IRS’s own summaries set out the two treatments. For a Roth IRA: “You cannot deduct contributions to a Roth IRA,” and “if you satisfy the requirements, qualified distributions are tax-free” (IRS: Roth IRAs, checked November 9, 2026). For a traditional IRA, contributions may be deductible depending on income and workplace plan coverage, and “distributions from a traditional IRA are taxed as ordinary income,” apart from any nondeductible basis (IRS Pub 590-B (2025), checked November 9, 2026).
A Roth distribution is qualified when it comes after a five-year period beginning with the first tax year for which a contribution was made to a Roth IRA set up for you and is also made at or after 59½, on disability, to a beneficiary after death, or for a first home up to a $10,000 lifetime limit (Pub 590-B). The two accounts also differ on required minimum distributions: a traditional IRA owner must begin them by April 1 of the year after reaching 73, while the original owner of a Roth IRA “doesn’t have to take distributions regardless of your age” (Pub 590-B).
The core comparison: your tax rate now versus later
Here is the idea with invented numbers. Suppose someone has $6,000 of pre-tax earnings they are willing to put toward retirement, and an assumed marginal federal rate of 22% today. The investment is assumed to grow at 6% a year for 25 years. That return is an assumption chosen to make the arithmetic visible, not a prediction; real returns vary and can be negative.
- Traditional: the full $6,000 goes in, because the deduction offsets the tax. At 6% for 25 years it grows to about $25,751 (6,000 × 1.06²⁵, a growth factor of about 4.2919). Every dollar is taxed when withdrawn.
- Roth: tax of 22% is paid first, so $4,680 goes in. At the same return it grows to about $20,086, and qualified withdrawals are tax-free.
What the traditional account is worth after tax depends on the rate when the money comes out:
| Assumed rate at withdrawal | Traditional, after tax | Roth, after tax |
|---|---|---|
| 12% | about $22,661 | about $20,086 |
| 22% (same as today) | about $20,086 | about $20,086 |
| 32% | about $17,511 | about $20,086 |
When the two rates are equal, the results are identical. That isn’t a coincidence: multiplying by (1 − tax rate) before growth or after growth gives the same answer. So the comparison turns on one question: is your marginal rate likely to be higher or lower when you withdraw than it is now?
To run this with your own numbers, use the Roth vs traditional comparison. It shows its formula and lets you change each assumption.
The same dollar limit shelters different amounts
The example above held the pre-tax cost constant. In practice, many people hit the contribution limit, which is the same dollar figure for both account types. For the 2026 tax year it is $7,500, or $8,600 at age 50 or older, across all of your IRAs combined (IRS: IRA contribution limits, checked November 9, 2026).
A $7,500 Roth contribution is $7,500 of after-tax money that will never be taxed again if withdrawn as a qualified distribution. A $7,500 traditional contribution still carries a future tax bill. So at the limit, on this arithmetic alone, the same dollar figure in a Roth represents more after-tax money, provided the tax saving from a traditional deduction isn’t invested elsewhere. That is a feature of the calculation, not a recommendation; how it applies depends on your situation, and a tax professional can confirm it. The comparison tool includes an option to invest that saving in a taxable account, which is the fairer side-by-side.
Who can make each kind of contribution in 2026
Eligibility can settle the question before tax rates come into it.
Roth IRA income limits. For the 2026 tax year, the IRS says the Roth contribution phase-out is $153,000 to $168,000 of modified AGI for single filers and heads of household, and $242,000 to $252,000 for married couples filing jointly. For a married person filing separately who lived with their spouse during the year, the range stays at $0 to $10,000 and isn’t adjusted for inflation (IRS news release IR-2025-111, November 13, 2025, checked November 9, 2026). Within the range the allowed amount shrinks; at or above the top, no direct Roth contribution is allowed. The worksheet that figures the reduced amount is explained in IRA contribution rules.
Traditional IRA deduction phase-outs. Anyone with taxable compensation can contribute to a traditional IRA, but the deduction can shrink. For the 2026 tax year, IR-2025-111 sets the phase-out at $81,000 to $91,000 for single filers covered by a workplace plan; $129,000 to $149,000 for joint filers when the contributing spouse is covered; $242,000 to $252,000 for a contributor who isn’t covered but is married to someone who is, on a joint return; and $0 to $10,000 for a covered married person filing separately. If neither spouse is covered by a workplace plan, the IRS limits page says the contributions are all deductible.
That produces a gap. A single filer covered at work with modified AGI above $91,000 but below $153,000 can’t deduct a traditional contribution in 2026, yet can still contribute to a Roth. A nondeductible traditional contribution has no up-front saving, so the comparison in the table above no longer applies in its simple form. Above the Roth limit, some people use a nondeductible contribution followed by a conversion; the rules that govern it are in backdoor Roth and the pro-rata rule.
What the simple comparison leaves out
A tax-rate comparison is a starting point. Several factors can move the answer, and people often weigh them alongside it:
- Unknown future rates. Tax law can change, and your income in retirement may be higher or lower than expected. Some people hold both account types so that later withdrawals can come from either.
- Required minimum distributions. Traditional IRAs require them from 73; Roth IRAs don’t during the original owner’s life. RMDs can add taxable income in years when you didn’t need the money.
- Effects of a deduction on other figures. A traditional deduction lowers adjusted gross income, which can affect other income-based rules in the year you contribute.
- Access to contributions. Under the ordering rules, regular Roth contributions are treated as coming out before earnings (Pub 590-B). Early-access planning sits outside this site; Money Master covers early-retirement strategy.
- State tax. Moving between states, or a state’s own treatment of retirement income, can change the result.
- Costs inside the account. The account type doesn’t change what a fund charges. See what a fund’s fee costs you.
How these weigh up depends on personal circumstances, and a tax professional can confirm how the rules apply to a specific situation.
Common questions
If my tax rate stays the same, does it matter which I choose? On the pure arithmetic, no: with equal rates, the same pre-tax amount and the same return, the after-tax results match. The differences then come from the contribution limit, required minimum distributions and the other factors above.
Can I split my contribution between Roth and traditional? Yes. The rules allow contributions to both in the same year, as long as the total across all IRAs stays within the combined limit: $7,500 for the 2026 tax year, or $8,600 at 50 and older, or your taxable compensation if less.
Does a Roth IRA have an income limit for contributions? Yes. For the 2026 tax year, the phase-out is $153,000 to $168,000 for single filers and $242,000 to $252,000 for joint filers. Traditional IRAs have no income limit on contributing, only on deducting.
Do these income limits apply to a Roth 401(k)? This guide covers IRAs only. Workplace plans have their own rules, set out in the plan’s documents and on the IRS’s retirement plan pages.
Has the IRS published 2027 figures? As of November 9, 2026, the IRS cost-of-living table for IRA limits still ran through 2026. This guide will be updated when 2027 figures are released.
Sources checked November 9, 2026: IRS: Roth IRAs; IRS: IRA contribution limits; IRS news release IR-2025-111; IRS Publication 590-A (2025); IRS Publication 590-B (2025); IRS COLA table.