"I just don't understand why $5,500 as a "Roth" IRA contribution cannot be deducted, but if contributed that same amount as a "Traditional" IRA contribution, TurboTax lets me deduct it."
Roth contribution are always "after-tax" and can never be deducted. That is the major difference e between Traditional IRA's (which can be deducted) and Roth IRA's.
With a Traditional IRA you get to deduct the contribution in the tax year that you make it. possible reducing the tax that you must pay in that year, BUT when you eventually take distributions from the Traditional IRA, the distributions are fully taxable as ordinary income. The reasoning is that you get a tax break when you are young, all of your contributions can grow tax free, and when you retire and might be in a lower tax bracket you take distribution and pay a lower tax.
Roth IRA's on the other hand are after-tax, so while you cannot deduct now, and you might have less to invest after paying the tax, when you take distributions, they are tax free. Over time, the benefit of the Roth tax free distributions of a Roth (after age 59 1/2) can outweigh the tax deductible IRA, particularity if you end up in a higher tax bracket after retirement.
Which one to invest in is up to you.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
