Traditional IRA Benefits: What They Are & Why They Matter

Understand the tax deductions and other benefits for the 2025 and 2026 tax years.

By Lyle Daly – Updated Nov 20, 2025 at 11:47 AM

Key Points

Traditional IRA contributions may reduce taxable income if eligibility criteria are met.
IRAs shield investment gains like dividends and profits from annual taxes.
IRAs offer broader investment choices than 401(k) plans.

A traditional IRA, which stands for "individual retirement account," is a tax-advantaged way to save for retirement. The benefits of an IRA include tax-deductible contributions and tax-deferred growth of investments.

Depending on your situation, the features of a traditional IRA might be more valuable to you than the benefits of the alternative, a Roth IRA. To help you decide, this guide explains the benefits of IRA investing and traditional IRAs in particular.

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Data source: IRS.

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For 2026 contribution and deduction purposes, here are the adjusted gross income (AGI) thresholds:

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Data source: IRS.

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If you're married and your spouse has an employer-sponsored retirement plan, but you don't, the 2025 AGI limits are $236,000 for a full deduction and $246,000 for a partial deduction, assuming you file a joint tax return. For the 2026 tax year, these AGI thresholds are $242,000 and $252,000, respectively.

The potential downside is that while your traditional IRA contributions can be tax-deductible, withdrawals from a traditional IRA are considered taxable income at whatever your then-current marginal tax rate ends up being. With Roth IRAs, contributions aren't tax-deductible, but withdrawals in retirement (after age 59 1/2) are tax-free.

Related retirement topics

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Understanding IRAs

Under the umbrella of individual retirement accounts, there are many options.

Roth IRA Conversion

Here's how to change another retirement account into a Roth IRA.

How Does an IRA Work?

All IRAs aren't created equal. Here's the nitty-gritty.

Roth IRAs

Want to get tax-free distributions in retirement? A Roth IRA may be right for you.

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About the Author

Lyle Daly is a contributing Motley Fool stock market analyst covering information technology and cryptocurrency. Lyle has been a contributor at the financial services company since 2018. His work has been featured on USA Today, Yahoo Finance, MSN, Fox Business, and Nasdaq. Before joining The Motley Fool, he wrote for financial brands including Intuit.

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