The amount of a contribution that is deductible on your income tax return depends on your Adjusted Gross Income (AGI) and whether you are covered under an employer sponsored qualified retirement plan. Thus, depending on your filing status (Single, Joint, etc.), and your AGI, your contributions may range from fully deductible to totally nondeductible. So even though you are eligible to contribute to your IRA, you may be in a position where none of these contributions are deductible. If your contribution is not tax deductible, you can still benefit from making a contribution because whatever earnings you have on your contributions won't be taxed until you withdraw that money. When you finally withdraw the money for your retirement -- after age 59 1/2 -- then, and only then, will the money be taxed as income at your ordinary income tax rate.