Traditional IRA vs Roth IRA: Which One Actually Makes Sense for Your 2025 Tax Return? (Updated: Jan 2026)
“Everyone says Roth IRA is better — but is that really true for your taxes?”
When preparing your 2025 U.S. tax return (filed in 2026), choosing between a Traditional IRA and a Roth IRA is often the first — and most confusing — retirement decision.
The reality is simple: this choice isn’t about performance. It’s about timing your taxes.
1️⃣ What hasn’t changed — and why the decision feels harder
The rules defining Traditional and Roth IRAs did not suddenly change in 2025.
What changed is the context.
More taxpayers now face higher retirement income projections, future RMD exposure, and uncertain long-term tax rates.
As a result, choosing an IRA has become a lifetime tax-planning decision, not a yearly deduction choice.
Think of IRAs as tax-timing tools.
You’re not choosing returns — you’re choosing when the IRS gets paid.
2️⃣ Eligibility rules that quietly trip people up
Both Traditional and Roth IRAs require earned income.
Where people get confused is assuming that “allowed to contribute” automatically means “allowed to deduct” or “allowed to use Roth.”
That’s not how the rules work.
- Roth IRA: Contribution eligibility phases out based on MAGI and filing status.
- Traditional IRA: Contributions may be allowed, but deductions depend on workplace retirement coverage and income.
- No earned income: Investment income alone generally disqualifies IRA contributions.
Being “over the Roth income limit” only applies to direct contributions.
It does not automatically end all Roth planning options.
3️⃣ Real-world tax planning example (NY EA perspective)
- Profile: New York resident in their 40s with high property and state income taxes
- What actually happens: Even with expanded SALT limits, itemizing does not always outperform the standard deduction
- EA conclusion: Traditional IRA may help short-term cash flow, but Roth IRA offers stronger control over future taxable income and RMD-driven tax spikes
4️⃣ Common mistakes taxpayers keep repeating
- Choosing Traditional IRA solely because it “feels like a refund now”
- Dismissing Roth IRA as useless because it lacks immediate deductions
- Ignoring how RMDs inflate taxable income later in life
- Is my current marginal tax rate unusually high — or temporary?
- Will I likely have taxable income in retirement?
- Could RMDs push me into higher brackets or Medicare surcharges?
5️⃣ Related resources
6️⃣ FAQ people actually search for
- Does a Traditional IRA really lower taxes?
It can reduce current taxable income if deductions apply, but future withdrawals are taxable. - Why do planners favor Roth IRAs long-term?
Because qualified withdrawals are tax-free and Roth IRAs avoid lifetime RMDs. - Can I have both Traditional and Roth IRAs?
Yes — diversification across tax buckets is often the safest approach.
This article is based on U.S. federal tax law.
Rules, thresholds, and strategies may change, and state tax laws vary.
Consult a qualified tax professional for advice tailored to your situation.