For tax year 2009 and 2010, you can contribute up to $5,000 to a traditional IRA. And if you’re age 50 or older in each of these years, you can make an extra $1,000 catch-up contribution.
If you’re a single taxpayer and you’re covered by an employer-sponsored retirement plan, or you’re a married taxpayer and either you or your spouse is covered by an employer plan, your eligibility depends on your modified adjusted gross income.
Traditional IRAs allow your earnings to grow tax deferred, so you won’t owe income taxes until you make withdrawals. And if you’re eligible, your contributions are tax deductible. Deductible contributions and earnings are taxed at your regular income tax rate when money is withdrawn.
To qualify to make tax-deductible contributions to a traditional IRA, you must be less than 70½ years old and have received compensation (in general, income earned from working). From there, you’re automatically eligible if neither you, nor your spouse if you’re married, are covered by an employer-sponsored retirement plan – no matter how high your income.
To learn more about traditional IRAs, review the articles in the following sections: