Traditional vs. Roth IRA for Self-Employed Owners: What the 2026 Limits Mean for You

When people talk about retirement plans for the self-employed, the SEP IRA and solo 401(k) get most of the attention. Traditional and Roth IRAs aren’t tied to your business at all. But if your business is your only source of income, they can still be an important piece of your plan.

Here’s how both work for a self-employed owner who files a Schedule C and has no employees.

Yes, as long as you have earned income. Self-employment income counts, and so do wages from a job. Your contribution can’t be more than your earned income for the year.

For 2026, you can contribute up to $7,500 total across all of your traditional and Roth IRAs. If you’re 50 or older, you can add a $1,100 catch-up contribution, for a total of $8,600.

For comparison, the 2025 limit was $7,000, with a $1,000 catch-up.

It can be deductible or non-deductible. That depends on two things: whether you or your spouse are covered by a retirement plan, and your income.

If neither you nor your spouse is covered by a retirement plan, you can generally deduct your full contribution no matter how much you earn.

If you are covered, the deduction phases out as your income goes up. This is important for self-employed owners, because having your own SEP IRA or solo 401(k) counts as being covered by a plan.

These ranges are based on your modified adjusted gross income (MAGI).

Below the range, you get the full deduction. Inside the range, you get a partial deduction. Above it, there’s no deduction.

If you can’t deduct it, you can still contribute. It just becomes a non-deductible contribution. As your income climbs, there are usually better options than a non-deductible traditional IRA, such as a SEP IRA or solo 401(k).

A Roth IRA flips the tax treatment. There’s no deduction when you contribute, because the money goes in after tax. In exchange, your earnings can come out tax-free, as long as you meet the distribution requirements.

Roth IRAs have income limits for contributing directly. For 2026, the phase-out ranges based on MAGI are:

Below the range, you can make a full contribution. Inside it, a reduced contribution. Above it, you can’t contribute directly.

There is a Roth conversion strategy that some higher-income owners use to get money into a Roth. It has its own rules and tax consequences, so we’ll cover it in a dedicated piece. If this might apply to you, bring it up with your CPA before you act on it.

No. A traditional IRA deduction isn’t a business deduction. It’s a deduction against your taxable income on your personal federal return, so it lowers your federal income tax. It doesn’t touch your self-employment tax, which is figured from your business profit.

A Roth contribution doesn’t lower either one, since there’s no deduction at all.

IRA contributions for a tax year are due by your tax filing deadline, which is usually April 15 of the following year. For 2026 contributions, that’s April 15, 2027.

This deadline can’t be extended. Filing an extension on your return gives you more time to file, but not more time to fund an IRA. That’s different from SEP IRA and solo 401(k) profit-sharing contributions, which can follow your extension.

It depends on your income, whether you qualify for the deduction, and what else you’re using for retirement. A traditional IRA may make more sense if you can deduct it and want the tax break now. A Roth IRA may make more sense if you wouldn’t get a deduction anyway and you’d rather have tax-free growth later.

The answer can change from year to year as your business grows. That’s why it’s worth revisiting every year, not just at tax time. With our clients, it’s part of the regular conversation, so the decision gets made with time to act instead of in a rush the week before April 15.

Retirement planning works best as part of a bigger conversation about your numbers. We sit down with our clients four times a year to go through their numbers and what to do next, including how much to set aside and where. We answer within one business day, and you’ll never be charged for asking a question.