A traditional Individual Retirement Account (IRA) is a personal savings plan that provides tax advantages to individuals saving for retirement. An individual who receives compensation, including alimony, that is includible in gross income and is under age 70 ½ throughout the tax year is entitled to make contributions to a traditional individual retirement account. Earnings in a traditional IRA are not taxed until distributions are made. In most cases IRA contributions are deductible. For single persons, heads of household, or married individuals who file separate returns, contributions to a traditional IRA are deductible if they do not exceed the lesser of the deductible amount - $5,000 for 2010, with an additional $1,000 catch-up (if you are over 50 years of age) or the individual’s compensation for that year that is includible in gross income. This amount may be reduced if you are an active participant in an employer-sponsored retirement plan.
