Traditional IRA: The Complete Guide

TL;DR: A Traditional IRA (individual retirement account) is a tax-advantaged retirement account where contributions may be tax deductible, savings grow tax-deferred, and withdrawals are generally taxed as ordinary income. For 2026, the contribution limit is $7,500 ($8,600 for savers age 50 and older), the deduction phases out only if you or your spouse is covered by a workplace retirement plan, early withdrawals before age 59 and a half generally carry a 10 percent penalty, and required minimum distributions begin at age 73.

What Is a Traditional IRA and How Does It Work?

A Traditional IRA is a retirement account that lets you contribute pre-tax or after-tax dollars, invest that money, and defer taxes on the growth until you withdraw it in retirement.

The account is opened through a custodian, the company that holds and administers the account on your behalf, and the money inside it can be invested in stocks, bonds, mutual funds, and other assets depending on the custodian’s offerings. This guide is part of our broader library on our IRA investing hub, and readers weighing an account structured around alternative assets like real estate or precious metals can find those mechanics on our self-directed IRA page. Whichever custodian you choose, the tax treatment described in this guide applies to any Traditional IRA.

Two features define the account. Contributions may reduce your taxable income the year you make them, and the balance grows without annual tax on dividends, interest, or capital gains inside the account. Both benefits are traded for a rule on the back end: withdrawals in retirement are generally taxed as ordinary income, and the account carries required minimum distributions once you reach a certain age, covered later in this guide.

What Are the 2026 Traditional IRA Contribution Limits?

The 2026 Traditional IRA contribution limit is $7,500, or $8,600 if you are age 50 or older, and contributions cannot exceed your taxable compensation for the year.

The Internal Revenue Service raised the combined traditional-and-Roth IRA contribution limit to $7,500 for 2026, up from $7,000 in 2025. The age-50 catch-up contribution rose to $1,100, for a combined total of $8,600 for savers 50 and older. Both figures come from IRS news release IR-2025-111 and are confirmed in Notice 2025-67 under Internal Revenue Code section 219(b)(5).

This limit is a combined cap across all your traditional and Roth IRAs together, not $7,500 to each account. It is also capped by compensation. If your taxable compensation for the year is less than $7,500 (or $8,600), your contribution limit is your compensation for the year, whichever is less.

There is one exception for spouses with no compensation of their own. Under the spousal IRA rule in IRC section 219(c), a spouse who files a joint return can contribute to a Traditional IRA even without taxable compensation, based on the working spouse’s compensation reduced by that spouse’s own IRA contributions for the year. This lets a non-earning or lower-earning spouse still build retirement savings in their own name.

Contributions for a given tax year must be made by the due date for filing that year’s return, not including extensions, generally April 15 of the following year. If you contribute between January 1 and that deadline, tell your custodian which tax year the contribution is for. Contributing more than the annual limit creates an excess contribution, and IRC section 4973 imposes a 6 percent excise tax on the excess for each year it remains in the account, unless you withdraw the excess and any earnings on it by your filing deadline.

Are Traditional IRA Contributions Tax Deductible?

Traditional IRA contributions may be tax deductible, but the deduction phases out only when you or your spouse is covered by a workplace retirement plan, while the right to contribute itself is never limited by income.

This is the single most misunderstood rule about Traditional IRAs. Anyone with taxable compensation can contribute up to the annual limit regardless of how much they earn. What income limits actually control is whether that contribution is deductible, and only when a workplace plan is in the picture.

If neither you nor your spouse is covered by a retirement plan at work, such as a 401(k) or a pension, your full contribution is deductible no matter how much you earn. Workplace coverage is the trigger that starts a phase-out, and the 2026 breakpoints published in IR-2025-111 and Notice 2025-67 under IRC section 219(g) depend on how you file. A covered single filer or head of household starts losing the deduction once modified adjusted gross income passes $81,000 and loses it entirely at $91,000. A married couple filing jointly sees the deduction fade between $129,000 and $149,000 when the contributing spouse is the covered one, and between $242,000 and $252,000 when only the other spouse is covered. Someone married filing separately and covered gets a much tighter band, from $0 to $10,000. The complete 2026 grids, alongside the Roth income limits, live on our IRA contribution limits reference page.

Below the bottom of a range, the deduction is full. Above the top, it is zero. Inside the range, it phases out proportionally. A contribution that is not deductible is not wasted. It still grows tax-deferred inside the account, and it creates basis you recover tax-free when you eventually take distributions.

How Are Traditional IRA Withdrawals Taxed?

Withdrawals from a Traditional IRA are generally included in your taxable income for the year you take them, except for any portion that represents already-taxed contributions.

Because most contributions to a Traditional IRA reduce taxable income going in, the government collects tax on the way out instead. The IRS states that Traditional IRA withdrawals “are included in taxable income except for any part that was already taxed (your basis) or that can be received tax-free.” That basis is the nondeductible portion of any contribution you made and did not deduct, tracked on IRS Form 8606.

This is the core trade-off against a Roth IRA, where contributions are never deductible and qualified withdrawals are tax-free instead. We cover that comparison in the Traditional IRA vs. Roth IRA section below.

What Is the Penalty for an Early Traditional IRA Withdrawal?

A 10 percent additional tax generally applies to Traditional IRA withdrawals taken before age 59 and a half, on top of the regular income tax owed, unless a specific exception applies.

This penalty is set by Internal Revenue Code section 72(t) and applies to the same distributions described above, taxed as ordinary income and then assessed the additional 10 percent unless you qualify for an exception, such as reaching age 59 and a half, a qualifying disability, certain education expenses, a first-time home purchase, or several other narrower carve-outs. The full exception list, the dollar limits attached to specific exceptions, and how each is documented are covered in depth on our required minimum distributions page.

When Do Required Minimum Distributions Start?

Traditional IRA owners must generally begin required minimum distributions at age 73.

Under the SECURE 2.0 Act, the age at which Traditional, SEP, and SIMPLE IRA owners must start taking required minimum distributions moved to 73, with the required beginning date set as April 1 of the following year. The IRS confirms in its retirement plan and IRA required minimum distribution guidance that account holders “generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 73.” That requirement applies to the original owner. Roth IRAs carry no such lifetime requirement.

The mechanics of how the required amount is calculated, the life-expectancy tables involved, and the penalty for missing a required distribution are covered in full on our dedicated required minimum distributions page.

Traditional IRA vs. Roth IRA: What’s the Difference?

A Traditional IRA is funded with contributions that may be deductible now and taxed on withdrawal, while a Roth IRA is funded with after-tax contributions that grow and come out tax-free.

The two accounts sit on opposite sides of the same trade. A Traditional IRA contribution may lower your taxable income this year, but ordinary income tax applies to withdrawals later. A Roth IRA contribution is never deductible. In exchange, a qualified Roth distribution is not includible in gross income at all, under IRC section 408A(d)(1)(A).

Required minimum distributions are the other structural difference. A Traditional IRA owner must begin taking distributions at 73, as described above, while a Roth IRA owner has no lifetime requirement to withdraw anything. Neither account is a universal winner. The choice generally comes down to whether you expect your tax rate to be higher or lower in retirement than it is today, and many savers hold both. Our full Roth IRA guide breaks down the Roth-specific contribution limits, income limits, and five-year rules in detail.

Frequently Asked Questions

What is a Traditional IRA?

A Traditional IRA is a retirement account where contributions may be tax deductible, savings grow tax-deferred, and withdrawals in retirement are generally taxed as ordinary income, as described in the “How It Works” section above.

What are the 2026 Traditional IRA contribution limits?

The 2026 limit is $7,500, or $8,600 for savers age 50 and older, capped at your taxable compensation for the year, per IRS news release IR-2025-111.

Is there an income limit on Traditional IRA contributions?

No. Contributions themselves are never limited by income. Only the deduction is limited, and only if you or your spouse is covered by a workplace retirement plan, per the phase-out ranges in the “Deductible” section above.

How are Traditional IRA withdrawals taxed?

Withdrawals are generally taxed as ordinary income, except for the portion that represents nondeductible contributions you already paid tax on.

What are the Traditional IRA rules for early withdrawal?

A 10 percent additional tax generally applies to withdrawals taken before age 59 and a half, unless you qualify for a specific exception under Internal Revenue Code section 72(t), detailed on our required minimum distributions page.

When do I have to start taking money out of a Traditional IRA?

Required minimum distributions generally begin at age 73 under the SECURE 2.0 Act, with full mechanics on our required minimum distributions page.

Educational Disclosure

This guide is educational information, not individualized tax, legal, or financial advice. Traditional IRA rules involve your specific income, filing status, and workplace coverage, all of which change the numbers above. Always consult your own legal, financial, and tax professionals before opening or changing a retirement account.

By Tim Schmidt + Sean Webster Reviewed by Sean Webster