An individual retirement arrangement (IRA) is a tax-favored personal savings arrangement, which allows you to set aside money for retirement. There are several different types of IRAs, including traditional IRAs and Roth IRAs. You can set up an IRA with a bank, insurance company, or other financial institution. Traditional IRAs You may be able to deduct some or all of your contributions to a traditional IRA. You may also be eligible for a tax credit equal to a percentage of your contribution. Amounts in your traditional IRA, including earnings, generally aren't taxed until distributed to you. IRAs can't be owned jointly. However, any amounts remaining in your IRA upon your death will be paid to your beneficiary or beneficiaries. Contributions To contribute to a traditional IRA, you, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. For tax years beginning on or after January 1, 2020, there is no age limit to contribute to an IRA (for tax years beginning before that date, you must have been under age 70½ at the end of the tax year in order to contribute to a traditional IRA). Compensation for purposes of contributing to an IRA doesn't 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. In certain cases, other amounts may be treated as compensation for purposes of contributing to an IRA, including certain alimony and separate maintenance payments received, certain amounts received to aid in the pursuit of graduate and postdoctoral studies, and certain difficulty of care payments received. You can figure your allowable deduction using the worksheets in the Instructions for Form 1040 and Form 1040-SR or in Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) and claim your IRA deduction on Form 1040, U.S. Individual Income Tax Return or Form 1040-SR, U.S. Tax Return for Seniors (attach Schedule 1 (Form 1040), Additional Income and Adjustments to Income). If you made nondeductible contributions to a traditional IRA, you must attach Form 8606, Nondeductible IRAs. Use Form 8880, Credit for Qualified Retirement Savings Contributions and Do I Qualify for the Retirement Savings Contributions Credit? to determine whether you're also eligible for a tax credit. Enter the amount of the credit on Form 1040 or Form 1040-SR (attach Schedule 3 (Form 1040), Additional Credits and Payments). Distributions Distributions from a traditional IRA are fully or partially taxable in the year of distribution. To determine if your IRA is taxable, see Is the Distribution from My Traditional, SEP or SIMPLE IRA Taxable? If you made only deductible contributions, distributions are fully taxable. Use Form 8606 to figure the taxable portion of withdrawals when the traditional IRA contains nondeductible contributions. Early Distributions Distributions made prior to age 59½ may be subject to an additional 10% tax. You may also owe an excise tax if you don't begin to withdraw minimum distributions by April 1 of the year after the year you reach age 72 (70 ½ if you reached age 70 ½ before January 1, 2020). These additional taxes are figured and reported on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Refer to the Instructions for Form 5329, Topic No. 557 and Do I Meet an Exception to the Additional Tax on Early Distributions from IRAs or Retirement Plans? for exceptions to the additional taxes. For relief for taxpayers affected by COVID-19 who take distributions or loans from retirement plans, refer to Notice 2020-50 and IR-2020-124. Roth IRAs A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren't deductible (and you don't report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren't subject to tax. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it's set up. For more information on Roth IRA contributions, refer to Topic No. 309 and to determine if a distribution from your Roth IRA is taxable, see Is the Distribution from My Roth Account Taxable? Additional Information For additional information on the different types of IRAs, including information on contributions, distributions, as well as conversions from one type of IRA to another, refer to Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs) and Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).