Hurricane tax relief. Special rules apply to the use of retirement funds (including IRAs) by qualified individuals who suffered an economic loss as a result of Hurricane Katrina, Rita, or Wilma. See Hurricane-Related Relief, in Chapter 4 for information on these special rules.

Traditional IRA contribution and deduction limit. The contribution limit to your traditional IRA for 2005 increased to the smaller of the following amounts:

If you were age 50 or older before 2006, the most that could be contributed to your traditional IRA for 2005 is the smaller of the following amounts:

For more information, see How Much Can Be Contributed? in chapter 1.

Roth IRA contribution limit. If contributions on your behalf were made only to Roth IRAs, your contribution limit for 2005 will generally be the lesser of:

If you were age 50 or older in 2005 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2005 is generally the lesser of:

However, if your modified AGI is above a certain amount, your contribution limit may be reduced. For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in chapter 2.

Modified AGI limit for traditional IRA contributions increased. For 2005, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified adjusted gross income (AGI) is:

For all filing statuses other than married filing separately, the upper and lower limits of the phaseout range increased by $5,000. See How Much Can You Deduct? in chapter 1.

Increase in limit on salary reduction contributions under a SIMPLE. For 2005, salary reduction contributions that your employer could make on your behalf under a SIMPLE plan increased to $10,000 (up from $9,000 in 2004). For more information about salary reduction contributions, see How Much Can Be Contributed on Your Behalf? in chapter 3.

Additional salary reduction contributions to SIMPLE IRAs for persons age 50 and older. For 2005, additional salary reduction contributions could be made to your SIMPLE IRA if:

For 2005, the additional amount is the lesser of the following two amounts.

For more information, see How Much Can Be Contributed on Your Behalf? in chapter 3.

Modified AGI. Beginning in 2005, the domestic production activities deduction is added back to income when figuring modified AGI. See Modified AGI in chapter 1.

Modified AGI for conversion purposes. Beginning in 2005, modified AGI for conversion purposes does not include required distributions from IRAs. For more information, see Modified AGI in chapter 2.

Traditional IRA contribution and deduction limit. The contribution limit to your traditional IRA for 2006 will be the smaller of the following amounts:

If you will be age 50 or older before 2007, the most that can be contributed to your traditional IRA for 2006 will be the smaller of the following amounts:

For more information, see How Much Can Be Contributed? in chapter 1.

Roth IRA contribution limit. If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2006 will generally be the lesser of:

If you will be age 50 or older before 2007 and contributions on your behalf are made only to Roth IRAs, your contribution limit for 2006 will generally be the lesser of:

However, if your modified AGI is above a certain amount, your contribution limit may be reduced. For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in chapter 2.

Modified AGI limit for traditional IRA contributions increased for a married couple filing a joint return. For 2006, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA will be reduced (phased out) if your modified adjusted gross income (AGI) is:

See How Much Can You Deduct? in chapter 1.

Additional salary reduction contributions to SIMPLE IRAs for persons age 50 and older. For 2006, additional salary reduction contributions can be made to your SIMPLE IRA if:

For 2006, the additional amount is the lesser of the following two amounts.

For more information, see How Much Can Be Contributed on Your Behalf? in chapter 3.

Qualified Roth contribution programs. For tax years beginning after 2005, 401(k) and 403(b) plans can create a qualified Roth contribution program so that participants may elect to have part or all of their elective deferrals to the plan designated as after-tax Roth contributions.

Figuring net income on returned or recharacterized IRA contributions. For figuring the net income on IRA contributions made during 2002 and 2003 that were returned to you or recharacterized, you can use the method described in this publication, the method permitted by Notice 2000-39, or the method in the proposed regulations. For more information, see How Do You Recharacterize a Contribution? or Contributions Returned Before Due Date of Return in chapter 1.

Simplified employee pension (SEP). SEP-IRAs are not covered in this publication. They are covered in Publication 560, Retirement Plans for Small Business.

Deemed IRAs. A qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. An employee's account can be treated as a traditional IRA or a Roth IRA. For this purpose, a “qualified employer plan” includes:

Statement of required minimum distribution. If a minimum distribution is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed. The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the year-end fair market value statement that you normally get each year. No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of owners who have died.

IRA 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.

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.

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.

This publication discusses individual retirement arrangements (IRAs). An IRA is a personal savings plan that gives you tax advantages for setting aside money for retirement.