Contribution to a traditional IRA reduces taxable income by that amount and, thus, reduces the amount you owe in taxes. If your income is higher than the maximum income limit, then you can't deduct your IRA contributions.
However, you still must report these contributions on your return, and you use Form 8606 to do so even if the contribution didn't impact your return.
An individual who fails to file Form 8606 to report a non-deductible contribution will owe the IRS a $50 penalty.
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