What is an Individual Retirement Plan?
Per the IRS, "an individual retirement arrangement, or IRA, is a personal savings plan which allows a taxpayer to set aside money for retirement, while offering tax advantages. A taxpayer "may be able to deduct some or all of their contributions to their IRA." Additionally, a taxpayer may also be eligible for a tax credit equal to a percentage of their contribution.
Amounts in an IRA, including earnings, "generally are not taxed until distributed to the taxpayer. But, IRA's cannot be owned jointly, but, any amounts remaining in an IRA upon a taxpayers death can be paid to taxpayers beneficiary or beneficiaries."
To contribute to a traditional IRA, a taxpayer must be under age 70 1/2 at the end of the tax year. Furthermore, a taxpayer and his or her spouse, if they file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self–employment.
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.