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Publication 590
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Important RemindersIRA interest. Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Do not report this interest on your return as tax-exempt interest. Form 8606. If you make nondeductible contributions to a traditional IRA and you do not file Form 8606, Nondeductible IRAs, with your tax return, you may have to pay a $50 penalty. Spousal IRAs. In the case of a married couple filing a joint return, up to $3,000, ($3,500 if 50 or older) can be contributed to IRAs (other than SIMPLE IRAs) on behalf of each spouse, even if one spouse has little or no compensation. For more information, see Spousal IRA Limit under How Much Can Be Contributed? in chapter 1. Spouse covered by employer plan. If you are not covered by an employer retirement plan and you file a joint return, you may be able to deduct all of your contributions to a traditional IRA even if your spouse is covered by a plan. For more information, see How Much Can I Deduct? in chapter 1. Distributions for higher education expenses. You can take distributions from your traditional or Roth IRA for qualified higher education expenses without having to pay the 10% additional tax on early distributions. For more information, see Higher education expenses under Age 59½ Rule in chapter 1, Traditional IRAs, and Additional Tax on Early Distributions in chapter 2, Roth IRAs. Distributions for first home. You can take distributions of up to $10,000 from your traditional or Roth IRA to buy, build, or rebuild a first home without having to pay the 10% additional tax on early distributions. For more information, see First home under Age 59½ Rule in chapter 1, Traditional IRAs, and Additional Tax on Early Distributions in chapter 2, Roth IRAs. Roth IRA. You cannot claim a deduction for any contributions to a Roth IRA. But, if you satisfy the requirements, all earnings are tax free and neither your nondeductible contributions nor any earnings on them are taxable when you withdraw them. Roth IRAs are discussed in chapter 2. Losses taken into account in calculating net income. A method for calculating net income associated with returned contributions and recharacterized contributions allows net income to be a negative amount. If no deduction is claimed for a contribution, there is no penalty if you withdraw the contribution or if you recharacterize it and withdraw or transfer (in the case of a recharacterization) any net income earned on the contribution by the due date of your return (including extensions) for the year. The calculation method allows you to take into account any loss on a returned or recharacterized contribution while it was in the IRA when calculating the amount of net income that must be withdrawn or recharacterized. If there was a loss in either case, net income may be a negative amount. See Excess Contributions Withdrawn by Due Date of Return in chapter 1 and Recharacterizations in chapter 2. Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. IntroductionThis publication discusses individual retirement arrangements (IRAs). An IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement. What are some tax advantages of an IRA? Two tax advantages of an IRA are that:
What's in this publication? This publication explains the rules for:
It also explains the penalties and additional taxes that apply when the rules are not followed. To assist you in complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables, which can be found throughout the publication and in the appendices at the back of the publication. How to use this publication. The rules that you must follow depend on which type of IRA you have. Use Table I-1 to help you determine which parts of this publication to read. Also use Table I-1 if you were referred to this publication from instructions to a form.
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