Roth IRA Deduction Calculator
Roth IRA contributions are not tax deductible, but skipping the deduction can still pay off. Compare a Traditional IRA’s upfront tax break with tax free Roth withdrawals using your own tax rates.
Tax Comparison
Compare Roth vs Traditional
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How the Deduction Comparison Works
The calculator puts the same yearly contribution into two accounts. The Roth grows tax free and is withdrawn tax free. The Traditional IRA grows tax deferred but is taxed at your retirement rate when you withdraw.
To keep the comparison fair, the tax you save from the Traditional deduction is not ignored. It is invested every year in a taxable side account whose earnings are taxed at your current rate.
Enter your contribution
Use the amount you plan to deposit each year. Both accounts receive the same contribution.
Set both tax rates
Your current marginal rate sets the value of the deduction. Your expected retirement rate sets the tax on Traditional withdrawals.
Add time and return
Years until retirement and expected return apply equally to both accounts, so only taxes create the difference.
Compare after tax values
The result shows each account’s spendable value, the winner, and the dollar advantage.
What Is the Formula?
Both accounts start from the same pre tax growth. The difference comes from when tax is paid and what happens to the deduction you receive today.
- C : Annual contribution
- The yearly amount placed in each account.
- Tnow, Current marginal rate
- The tax rate your deduction saves you today.
- Tret, Retirement tax rate
- The rate you expect to pay on Traditional IRA withdrawals.
- r : Expected return
- The annual growth rate used for both retirement accounts.
- n : Years until retirement
- How many years of contributions and growth are modeled.
- Sn, Side account
- Where the yearly tax savings grow, taxed each year at your current rate.
If both tax rates match, the two retirement accounts are equal before the side account. The Roth still edges ahead because the side account loses part of its growth to annual taxes.
Who Wins at Different Tax Rates
This grid shows the winner and margin for $7,000 a year over 30 years at an 8% return. Read across from your current rate to your expected rate in retirement.
| Current rate | Retire at 12% | Retire at 22% | Retire at 24% | Retire at 32% |
|---|---|---|---|---|
| 12% | Roth +$17,224 | Roth +$102,866 | Roth +$119,994 | Roth +$188,508 |
| 22% | Traditional +$32,173 | Roth +$53,469 | Roth +$70,597 | Roth +$139,111 |
| 24% | Traditional +$40,122 | Roth +$45,520 | Roth +$62,648 | Roth +$131,162 |
| 32% | Traditional +$66,537 | Roth +$19,105 | Roth +$36,234 | Roth +$104,747 |
The Traditional IRA only wins in this model when your retirement rate is clearly lower than your current rate.
Example: 22% Now, 18% in Retirement
A saver in the 22% bracket expects a lower 18% rate in retirement. That usually favors taking the deduction, so it is a useful test case.
- 1Roth: $7,000 a year at 8% for 30 years grows to $856,421, and all of it is tax free.
- 2Traditional: the same deposits also reach $856,421, but 18% tax on withdrawal leaves $702,265.
- 3Deduction: $7,000 × 22% = $1,540 saved each year, invested at 8% × (1 minus 0.22) = 6.24%, grows to $134,944.
- 4Traditional total: $702,265 + $134,944 = $837,209.
FAQs
No, Roth IRA contributions are made with after tax money and are never deductible on your federal return.
The Traditional side account is taxed on its earnings every year, while every Roth dollar compounds untaxed.
The calculator invests it in a taxable account that earns your return minus tax at your current rate.
Lower income savers may qualify for the Saver’s Credit, worth 10% to 50% of up to $2,000 contributed per person.
Yes, if you or your spouse are covered by a workplace plan, the Traditional deduction phases out above certain incomes.
Yes, add your state rate to both fields, since retiring to a lower tax state can tip the result toward Traditional.
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