Part of our 2026 Retirement Planning Series
After years of shifting rules, 2026 offers something investors rarely get, clarity. Contribution limits are known, tax rates are set, and the planning window ahead is well defined. In our recent overview of 2026 retirement planning, we covered the broader changes shaping this year. This article is the first in a series that breaks those rules down, starting with Traditional and Roth IRAs. These accounts are often treated as simple savings vehicles, but the way they interact with income, taxes, and long-term strategy can have a lasting impact on overall wealth.
2026 Contribution Limits and Catch-Up Provisions
The annual contribution limit for IRAs has increased for 2026. Whether you contribute to a Traditional IRA, a Roth IRA, or a combination of both, you can put in up to $7,500 for the year (an increase from $7,000 in 2025). If you are age 50 or older, you can contribute an additional catch-up amount of $1,100 (up from the long-standing $1,000 catch-up). That brings the total 2026 IRA contribution limit to $8,600 for those 50+. This boost is a result of inflation indexing; the catch-up contribution is now adjusted for cost-of-living increases in $100 increments, so it rose to $1,100 for 2026.
IRA Contribution Limits
2025 vs. 2026 Comparison
It’s crucial to note that these limits apply to all IRAs combined. You cannot contribute $7,500 to a Traditional IRA and another $7,500 to a Roth IRA in the same year. The $7,500 (or $8,600 if age 50+) is the cap for your total IRA contributions across both types.
You must also have enough taxable compensation to support the contribution. In general, “compensation” includes things like wages, salaries, tips, commissions, and net earnings from self-employment. Investment income and Social Security benefits don’t count as compensation for IRA contribution purposes. If you file a joint return, special “spousal IRA” rules may allow a non-working spouse to contribute as well, as long as the couple’s combined taxable compensation is high enough.
Traditional IRA Rules and Income Phase-Outs (2026)
Traditional IRAs allow many taxpayers to deduct their contributions, which can lower your taxable income today. If you’re not covered by a retirement plan at work (and your spouse isn’t either), you’re eligible to make a fully deductible Traditional IRA contribution regardless of income. This means you get an immediate tax break and effectively letting you invest with pre-tax dollars. For example, contributing the $7,500 limit could save a taxpayer in the 24% bracket $1,800 in federal tax (since the contribution reduces taxable income by $7,500). However, if you or your spouse is covered by an employer’s retirement plan (like a 401(k)), the deduction for a Traditional IRA is restricted by your income level.
For 2026, those income thresholds (based on modified adjusted gross income, or MAGI) have inched upward with inflation. Single filers who are covered by a workplace plan can take a full deduction if their MAGI is below $81,000. The deduction then phases out and is completely unavailable once MAGI exceeds $91,000.
Married couples filing jointly face a phase-out if the IRA-contributing spouse is covered by a work plan: for 2026, the joint MAGI phase-out range is $129,000 to $149,000. Above $149,000 MAGI, a covered person’s Traditional IRA contribution can’t be deducted. If you’re not covered by a plan but your spouse is, you get a much higher phase-out range – in 2026, the deduction for your IRA phases out only when joint MAGI is between $242,000 and $252,000. And for married individuals filing separately who are covered by a plan, the deductible amount is always very limited, with a phase-out from $0 to $10,000, unchanged from previous years.
2026 Traditional IRA Deduction Phase-Outs
Based on Modified Adjusted Gross Income (MAGI)
| Filing Status | Phase-Out Begins | Phase-Out Ends |
|---|---|---|
| Single / Head of Household Covered by workplace plan |
$81,000 | $91,000 |
| Married Filing Jointly Spouse making contribution is covered |
$129,000 | $149,000 |
| Married Filing Jointly Contributor not covered, but spouse is |
$242,000 | $252,000 |
| Married Filing Separately Covered by workplace plan |
$0 | $10,000 |
If your income is above these ranges, you can still contribute to a Traditional IRA up to the $7,500 limit – there’s no income cap on contributing, but your contribution will be non-deductible. In that case, you won’t get an upfront tax break. Instead, you contribute with after-tax dollars, and it becomes important to track your “basis” (the non-deductible contributions) so that you don’t pay tax on that portion again when you withdraw.
The earnings on all Traditional IRA contributions will still grow tax-deferred, and upon withdrawal in retirement, any previously untaxed amounts will be taxed as ordinary income. (If you withdraw before age 59½, early withdrawal penalties generally apply.) Also keep in mind that Traditional IRAs are subject to required minimum distributions (RMDs), leading to mandatory taxable withdrawals in your 70s (age 73 under current law). This is a key difference from Roth IRAs, which have no RMDs for the original owner.
Roth IRA Rules and Income Limits (2026)
Roth IRAs offer the opposite tax treatment: contributions are not deductible upfront, but your withdrawals in retirement can be completely tax-free (as long as you’re over 59½ and the Roth account has been open at least 5 years). Roth IRAs also have the advantage of no required minimum distributions during the original owner’s lifetime, allowing your money to potentially grow tax-free for a longer period (even benefiting your heirs). The trade-off is that you must contribute after-tax dollars, meaning you get no tax break in the contribution year, and eligibility to contribute is capped at certain income levels.
For 2026, the IRS has adjusted the Roth IRA income limits upward for inflation. Singles (and heads of household) with MAGI up to $153,000 can contribute the full Roth amount. The allowable contribution then phases out for MAGI above that level, and if you earn $168,000 or more, you cannot contribute directly to a Roth IRA for 2026. Married couples filing jointly have a phase-out range of $242,000 to $252,000 of MAGI for Roth contributions. Once joint MAGI hits $252,000, no direct Roth contributions are allowed. (Married filers filing separately again have a $0–$10,000 phase-out, effectively barring direct Roth contributions for most who choose that status.)
Roth IRA at a Glance
2026 Income Limits & Tax Treatment
No upfront deduction
No tax on earnings
*Age 59½ + 5-year rule
If your income falls within a phase-out range, you are allowed a partial Roth contribution for 2026 – essentially a reduced limit. (For example, a single person with MAGI of $160K might be able to contribute only a few thousand dollars, not the full $7,500.) Calculating a partial contribution can be done with IRS worksheets, but many high earners find themselves completely over the limit.
The takeaway is that high-income individuals are often prohibited from contributing to a Roth IRA directly. However, there is a workaround strategy to still get money into a Roth
The Backdoor Roth Strategy in 2026
The backdoor Roth IRA is a technique that high earners have used for years, and it remains alive and well in 2026. In essence, a “backdoor Roth” means contributing to a Traditional IRA first (often non-deductible) and then converting those funds to a Roth IRA. This strategy gets around the Roth income limits because Traditional IRA contributions have no income ceiling. Even if you make too much to qualify for a direct Roth contribution, you’re allowed to put $7,500 into a Traditional IRA (though as noted, it may not be deductible). You can then promptly convert that contribution to a Roth IRA.
Although it sounds counterintuitive, current tax law does not prohibit conversions based on income. In fact, since 2010, anyone can convert a Traditional IRA to Roth, regardless of income level. Congress has considered shutting this “backdoor” in the past, but notably, recent legislation did not eliminate it.
In fact, the 2025 “One Big Beautiful Bill Act” specifically left backdoor Roth strategies untouched, despite early proposals to end them. So high-income individuals can still make nondeductible Traditional IRA contributions and then convert them to Roth.
A backdoor Roth is particularly effective if you have income above the Roth limits but still want to maximize retirement contributions. It’s also most tax-efficient when you don’t have other pre-tax IRA dollars in any Traditional, SEP, or SIMPLE IRA (including rollover IRAs). That’s because of the IRS pro-rata rule: when you convert, the taxable portion is determined based on the ratio of pre-tax to after-tax amounts across all of your non-Roth IRAs, using your year-end IRA values.
Pro-Rata Rule Calculator
Estimate taxes on your backdoor Roth conversion
For example, if you already have a large rollover IRA, a backdoor Roth conversion could trigger taxes on part of the conversion. But if you don’t have any pre-tax IRA balance (say, all your other retirement savings are in a 401(k) or Roth accounts), then converting the new contribution will typically result in little or no tax due (aside from any small earnings the contribution generated before conversion).
Conclusion & Next Steps
The 2026 updates to IRA rules give everyone a bit more room to save for retirement. Traditional and Roth IRAs remain foundational tools for tax-efficient investing, and understanding the nuances (deductibility, income phase-outs, and backdoor strategies) is vital, especially for high earners. At the same time, the broader tax landscape in 2026 offers a favorable, albeit temporary, window to execute strategic moves like Roth conversions.
Is your current financial strategy taking full advantage of these 2026 opportunities? If you’re unsure, or would simply like a strategy session, contact us today to ensure your 2026 retirement game plan is firing on all cylinders. All you have to do is click the button below.
Sources:
- https://www.irs.gov/newsroom/401k-limit-increases-to-24500-for-2026-ira-limit-increases-to-7500
- https://www.nkcpa.com/making-the-most-of-the-new-deduction-for-seniors
- https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
