We are presenting a practical and detailed example of how to perform incremental dynamic analysis (IDA), interpret the results and apply them to performance‐based earthquake engineering. IDA is an emerging analysis method that offers thorough seismic demand and capacity prediction capability by using a series of nonlinear dynamic analyses under a multiply scaled suite of ground motion records. Realization of its opportunities requires several steps and the use of innovative techniques at each one of them. Using a nine‐story steel moment‐resisting frame with fracturing connections as a test bed, the reader is guided through each step of IDA: (1) choosing suitable ground motion intensity measures and representative damage measures, (2) using appropriate algorithms to select the record scaling, (3) employing proper interpolation and (4) summarization techniques for multiple records to estimate the probability distribution of the structural demand given the seismic intensity, and (5) defining limit‐states, such as the dynamic global system instability, to calculate the corresponding capacities. Finally, (6) the results can be used to gain intuition for the structural behavior, highlighting the connection between the static pushover (SPO) and the dynamic response, or (7) they can be integrated with conventional probabilistic seismic hazard analysis (PSHA) to estimate mean annual frequencies of limit‐state exceedance. Building upon this detailed example based on the nine‐story structure, a complete commentary is provided, discussing the choices that are available to the user, and showing their implications for each step of the IDA.