To contribute to a traditional IRA, you must be under age 70¹/₂ at the end of the tax year and have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. In addition, taxable alimony and separate maintenance payments received by an individual are treated as compensation for IRA purposes.

Compensation does not include earnings and profits from property, such as rental income, interest and dividend income, or any amount received as pension or annuity income, or as deferred compensation.

The most you can contribute to your traditional or ROTH IRA for 2009 or 2010 is the smaller of $5,000 if you are under 50 ($6,000 if you are 50 or older) or your taxable compensation for the year. If neither you nor your spouse is covered by a qualified retirement plan at any time during the year, your contributions to a traditional IRA will be fully deductible. If you are covered by a qualified retirement plan, your IRA deduction may be reduced or eliminated, depending on the amount of your income and your filing status. Contributions to ROTH IRAs are reduced or eliminated for certain income levels. Contributions to traditional IRAs reduce the limit for ROTH IRAs.

The deadline for making a contribution to a traditional IRA for the year is the due date of your return, not including any extensions of time to file.

You may choose to take the deduction on a return filed before the contribution is actually made, provided you make the contribution by the due date of that return, not including extensions.

Amounts you withdraw from your IRA are fully or partially taxable in the year you withdraw them. If you made only deductible contributions, withdrawals are fully taxable. If you made any nondeductible contributions, withdrawals are partially taxable. Use IRS Form 8606 to figure the taxable portion of withdrawals.

Amounts you withdraw before you reach age 59¹/₂ may be subject to a 10% additional tax. You also may owe an additional tax if you do not begin to withdraw minimum distribution amounts by April 1st of the year after you reach age 70¹/₂.