ADJUSTMENT    Traditional  IRA   The original IRA is referred  to a as a “traditional IRA” two advantages in traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances,  Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA. In traditional IRA you may able to deduct some or all of your contribution to it, but it is depend on circumstances. You can set up and make contributions a traditional IRA if You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70 1/2 by the end of the year. If you file Form 1040. enter your IRA deduction on line 32 of that form. If you file Form 1040A, enter your IRA deduction on line 17. You cannot deduct IRA contributions on Form 1040EZ. The maximum contributed and deduction limit to your traditional IRA for 2005 increase to  the smaller of the following amounts: - $4,00 ($5,000 if you are 50 or older in 2006). Your taxable compensation for the year This is the most that can be contributed regardless of whether the contributions are to one or  more traditional IRAs or whether all or part of the contributions are nondeductible. A traditional IRA is a personal savings plan that gives you tax advantages for saving for retirement. Contributions to a traditional IRA may be tax deductible – either in whole or in part. Also, the earnings on the amounts in your IRA are not taxed until they are distributed. The portion of the contributions that was tax deductible also does not get taxed until distributed. You can convert amounts from a traditional IRA into a Roth IRA if, for the tax year you make the withdrawal from the traditional IRA, both of the following requirements are met. Your modified AGI (explained later under Roth IRAs) is not more than $100,000. You are not a married individual filing a separate return. If you not did not  live with your spouse at any time  during the year and you file a separate return, your filing status, for this purpose, is single.    Roth IRA   You may be able to establish and make nondeductible contributions to a retirement plan called a Roth IRA. You do not report Roth IRA contributions on your return. On the other hand Roth IRA is also a personal savings plan but operates somewhat in reverse compared to a traditional IRA. For instance, contributions to a Roth IRA are not tax deductible while contributions to a traditional IRA may be deductible. However, while distributions (including earnings) from a traditional IRA may be included in income, the distributions (including earnings) from a Roth IRA are not included in income. The contribution limit for Roth IRAs depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs. If contributions were made on your behalf only to Roth IRAs, your contribution limit for 2005 is generally the lesser of $4000 or your taxable compensation for the year. If you were 50 or older in 2006 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2006 is generally the lesser of $5000 or your taxable compensation for the year. However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. You may be able to convert amounts from either a Traditional , SEP, or SIMPLE IRA into a Roth IRA. You may be abloe to recharacterize contributions made to one IRA as having been made directly to a different IRA. You can roll amounts over from one Roth IRA to another Roth IRA.  Generally, you can contribute to a Roth IRA if you have taxable compensation and your modified AGI is less than $160,000 for married filing jointly or qualifying widow(er) $10,000 for married filing separately and you lived with your spouse at any time during the year, or $110,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year.    How is Traditional IRA different from Roth IRA?   A traditional IRA is a personal savings plan that gives you tax advantages for saving for retirement. Contributions to a traditional IRA may be tax deductible – either in whole or in part. Also, the earnings on the amounts in your IRA are not taxed until they are distributed. The portion of the contributions that was tax deductible also does not get taxed until distributed. On the other hand Roth IRA is also a personal savings plan but operates somewhat in reverse compared to a traditional IRA. For instance, contributions to a Roth IRA are not tax deductible while contributions to a traditional IRA may be deductible. However, while distributions (including earnings) from a traditional IRA may be included in income, the distributions (including earnings) from a Roth IRA are not included in income.