Introduction to IRA Deductions

If you want to pay less income tax and save for your retirement, you may be interested in a traditional individual retirement account (IRA). Besides adding to your retirement nest egg, the contributions you make may be tax-deductible. The rules can be complex, though.

Traditional IRAs offer you a way to save for retirement and may allow you to deduct all or part of your contributions from your current taxable income. The amount you may deduct from your current taxable income depends upon your adjusted gross income (AGI) and whether you are covered by an employer-sponsored retirement plan.

However, when you withdraw funds from your traditional IRA, your distributions are taxable, so you save taxes only when you make contributions but pay them when you make withdrawals. This could be a benefit if you are in a higher tax bracket while making contributions but in a lower tax bracket when withdrawing.

Traditional IRAs have significant tax advantages for those who qualify and should be considered as part of your retirement planning.