IRA, Roth IRA, Taxable or HSA: Which Account Does What
How a traditional IRA, a Roth IRA, a taxable brokerage account and an HSA each treat contributions, growth and withdrawals, with the IRS's 2026 limits.
An index fund is the same fund whether you hold it in an IRA, a Roth IRA, a taxable brokerage account or a health savings account. What changes is the tax: when you pay it, on what, and what happens if you take the money out early. This guide sets out what each account does under federal rules, so you can compare them on their own terms.
The figures below are for the 2026 tax year and come from the IRS. State income tax rules can differ from the federal rules described here.
The four accounts in one table
| Traditional IRA | Roth IRA | Taxable brokerage | HSA | |
|---|---|---|---|---|
| Money going in | May be deductible, depending on income and workplace plan coverage | Not deductible | Not deductible | Generally deductible |
| Growth while invested | Not taxed each year | Not taxed each year | Interest, dividends and realized gains taxed each year | Not taxed each year |
| Money coming out | Taxed as ordinary income, except any nondeductible basis | Qualified distributions tax-free | Only gains are taxed when you sell; what you paid is not | Tax-free for qualified medical expenses |
| Who can contribute | Anyone with taxable compensation | Taxable compensation, below an income limit | Anyone | Only people eligible under the HDHP rules |
| 2026 tax year limit | $7,500 combined across all IRAs ($8,600 at 50+) | Same combined limit | No limit | $4,400 self-only, $8,750 family |
Traditional IRA: a possible deduction now, tax later
A traditional IRA lets the money inside grow without yearly tax on dividends or gains. Withdrawals are generally taxed as ordinary income. IRS Publication 590-B says plainly that “distributions from a traditional IRA are taxed as ordinary income,” apart from any part that represents nondeductible contributions (IRS Pub 590-B (2025), checked November 9, 2026).
Whether the contribution itself is deductible depends on your income and whether you or your spouse are covered by a retirement plan at work. You can open and fund a traditional IRA whether or not you have a workplace plan; Publication 590-A says the deduction limits “don’t affect the amount that can be contributed” (IRS Pub 590-A (2025), checked November 9, 2026). For the 2026 tax year, the IRS set the deduction phase-out for a single filer covered by a workplace plan at $81,000 to $91,000 of modified AGI, and at $129,000 to $149,000 for a married couple filing jointly where the contributing spouse is covered (IRS news release IR-2025-111, November 13, 2025, checked November 9, 2026). The full set of ranges is in IRA contribution rules and deadlines.
Two other traditional IRA rules matter for long-term investors. Withdrawals before age 59½ are generally subject to a 10% additional tax unless an exception applies, and owners must begin required minimum distributions by April 1 of the year after they reach age 73 (IRS Pub 590-B (2025), checked November 9, 2026).
Roth IRA: tax now, tax-free qualified withdrawals later
A Roth IRA reverses the timing. The IRS’s Roth IRA page says “you cannot deduct contributions to a Roth IRA,” and that qualified distributions “are tax-free” (IRS: Roth IRAs, checked November 9, 2026).
A distribution is qualified when it comes after a five-year period that begins with the first tax year for which a contribution was made to a Roth IRA set up for you, and it is also made at or after age 59½, because of disability, to a beneficiary after your death, or for a first home (up to a $10,000 lifetime limit). If a withdrawal isn’t qualified, the IRS ordering rules treat your regular contributions as coming out first, then conversions and rollovers, then earnings (IRS Pub 590-B (2025), checked November 9, 2026). The original owner of a Roth IRA doesn’t have to take required minimum distributions at any age.
Roth contributions are limited by income. For the 2026 tax year, the ability to contribute phases out between $153,000 and $168,000 of modified AGI for single filers and heads of household, and between $242,000 and $252,000 for married couples filing jointly (IR-2025-111, checked November 9, 2026). Whether paying tax now or later works out better is a comparison of tax rates, explained in Roth or traditional?. People above the income limit sometimes contribute through a conversion; the forms involved are covered in backdoor Roth and the pro-rata rule.
The shared IRA limit
Traditional and Roth IRAs share one limit. For the 2026 tax year, the IRS limit on total contributions to all of your IRAs is $7,500, or $8,600 if you are 50 or older, or your taxable compensation for the year if that is less (IRS: IRA contribution limits, page updated September 23, 2026, checked November 9, 2026). The IRS’s Roth page puts it directly: “The same combined contribution limit applies to all of your Roth and traditional IRAs.” So $4,000 to a Roth IRA and $3,500 to a traditional IRA uses up the whole 2026 limit for someone under 50.
As of November 9, 2026, the IRS had not published 2027 IRA limits; its cost-of-living table still ran through 2026 (IRS COLA table, checked November 9, 2026).
Taxable brokerage account: no limits, tax as you go
A taxable brokerage account has no contribution limit, no income test and no restriction on when you can withdraw. The trade-off is that its income is taxed along the way. Interest and dividends are reported each year, and when you sell an investment for more than you paid, the gain is taxed in the year you sell.
How a gain is taxed depends on how long you held it. The IRS says that if you hold an asset “for more than one year before you dispose of it,” the gain or loss is long-term; net short-term gains are taxed as ordinary income (IRS Topic 409, checked November 9, 2026). Long-term gains get lower rates of 0%, 15% or 20% depending on taxable income. Losses can offset gains, and up to $3,000 of net capital loss a year ($1,500 if married filing separately) can offset other income, with the rest carried forward. The 2026 rate thresholds are in how capital gains are taxed, and the treatment of fund payouts is in dividends explained.
What a taxable account offers is flexibility: money can come out at any age without an additional tax, which is why it is often used for goals that aren’t retirement. The points people often check before opening one are covered in what to check before you fund a brokerage account.
HSA: a health account that can be invested
A health savings account is tied to health coverage. To contribute, you must be covered by a high deductible health plan (HDHP), have no other health coverage except what the rules permit, not be enrolled in Medicare and not be claimable as someone else’s dependent (IRS Pub 969 (2025), checked November 9, 2026). Whether these conditions are met depends on your situation; a tax professional can confirm it.
When those conditions are met, the HSA’s tax treatment is unusually generous. Contributions are generally deductible even if you don’t itemize, earnings are not taxed while held in the account, and distributions used for qualified medical expenses “aren’t taxed.” Money taken out for anything else is taxable and, before age 65, disability or death, carries an additional 20% tax. The account is portable: Pub 969 says it “stays with you if you change employers or leave the work force.”
For the 2026 tax year (calendar year 2026), Revenue Procedure 2025-19 sets the HSA contribution limit at $4,400 for self-only coverage and $8,750 for family coverage. To count as an HDHP in 2026, a plan must have an annual deductible of at least $1,700 (self-only) or $3,400 (family), and out-of-pocket expenses, not counting premiums, of no more than $8,500 or $17,000 (Rev. Proc. 2025-19, Internal Revenue Bulletin 2025-21, checked November 9, 2026). People who are 55 or older at the end of the tax year can contribute an extra $1,000 (Pub 969).
For 2027, the IRS has announced HSA limits of $4,500 for self-only coverage and $9,000 for family coverage, with HDHP minimum deductibles of $1,750 and $3,500 (Rev. Proc. 2026-24, Internal Revenue Bulletin 2026-25, June 15, 2026, checked November 9, 2026). Those apply to 2027 contributions; 2026 contributions use the 2026 figures above.
Many HSA providers let the balance be invested in funds. The rules that matter before doing that are covered in the HSA as an investment account.
How people compare the accounts
The accounts aren’t ranked here, because the answer depends on things only you know: your tax rate now and later, whether you’re eligible for an HSA, whether you have a workplace plan, and when you’ll need the money. A few questions people often work through:
- When will I need this money? Money for a goal within a few years usually isn’t invested at all; the MoneyMaster guide to where short-term money goes covers that. Retirement accounts carry an additional tax on most early withdrawals, and a taxable account doesn’t.
- Is my tax rate likely higher now or later? That is the core of the traditional-versus-Roth comparison.
- Am I eligible for each one? Roth contributions have an income limit, traditional deductions have phase-outs, and HSAs need HDHP coverage.
- What will I hold, and where? Some investments produce more taxable income each year than others, which matters most in a taxable account. See asset location.
Many people build an emergency fund before investing; MoneyMaster explains how to size one. Early-retirement questions, such as reaching retirement money before 59½, are covered by MoneyMaster rather than here.
Common questions
Can I have a traditional IRA and a Roth IRA in the same year? Yes. The rules allow both, but contributions to both count toward one combined limit: $7,500 for the 2026 tax year, or $8,600 at 50 and older, or your taxable compensation if less.
Does a taxable account have any tax advantage? It has no special tax shelter, but long-term gains and qualified dividends can be taxed at lower rates than ordinary income, and you choose when to sell. It also has no contribution limit or withdrawal age.
Can I contribute to an HSA if my employer offers one but my plan isn’t an HDHP? Not under the eligibility rules in IRS Publication 969, which require HDHP coverage and no other disqualifying coverage. Your plan documents state whether the plan qualifies as an HDHP, and a tax professional can confirm how the rules apply to you.
Are the 2027 limits out yet? For HSAs, yes: Rev. Proc. 2026-24 sets 2027 limits of $4,500 (self-only) and $9,000 (family). As of November 9, 2026, the IRS had not published 2027 IRA limits; this guide will be updated when it does.
Sources checked November 9, 2026: IRS Publication 590-A (2025); IRS Publication 590-B (2025); IRS Publication 969 (2025); IRS: IRA contribution limits; IRS: Roth IRAs; IRS news release IR-2025-111; IRS COLA table; Rev. Proc. 2025-19 (IRB 2025-21); Rev. Proc. 2026-24 (IRB 2026-25); IRS Topic 409.