Posted on by Jim

The Easy And Legal Way To Turn Taxable Income Into Tax-Free Income

This may sound a little strange, but there are actually ways that you can convert your taxable income into non-taxable income. You can also do this without worrying about getting audited by the IRS.

This is one of my favorite ways of dong this: Although this has been a part of our federal income tax code for over 30 years, many people still don’t take advantage of it. So what is it that I am referring to?

The IRA — Individual Retirement Account.

I can hear many of you say right now, “Oh, I know all about that one; what’s so great about an IRA?”? Just give me a little time, and I’ll explain three new benefits that the IRA rules have that you may not know about:

BENEFIT #1: How To Avoid Tax Rather Than Postpone Tax

First. There are actually now two kinds of IRA’s available.

The so-called Traditional IRA is the one that first came out way back in the 1970’s.

But there’s a newer version of the IRA that’s only a few years old. This one is called the Roth IRA. And the difference between these two IRA’s is very significant.
Your traditional IRA contributions are tax-deductible, which result in immediate tax savings. The growth of those contributions is also tax-sheltered while the funds remain in the account, but after some time all tax-deductible Traditional IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.

In other words, Traditional IRA’s offer the opportunity to temporarily postpone taxes.

On the other hand, the Roth IRA offers the opportunity to permanently avoid taxes. With a Roth IRA, you don’t take a deduction for your contributions; instead, you make a contribution with “after-tax” dollars.

Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.

Let me show you an example to demonstrate what I am saying:

Let’s say that you invest $2,000 per year for 20 years into a Roth IRA. At the end of twety years, you will have invested a total of $40,000. Now if that Roth IRA earns an average of 10% per year, that $40,000 will grow into $126,005.

Here is the interesting part: If we assume that the IRA has existed for at least five years, and you are at least 59 ½ years old, you can withdraw the entire $126,005 without paying tax.
On the other hand, if this money had been invested in a Traditional IRA, the entire $126,005 would be subject to income tax when it is taken out.

The $86,005 of growth is magically converted from taxable income status to non-taxable income status. Let’s assume that you are in the 15% federal tax bracket. You could possibly be saving $12,901. If you add whatever state income tax you might have, you could save over $15,000 in taxes.

BENEFIT #2: You can also take An Extra 3 ½ Months To put money into Your IRA.

The deadline for contributing to your IRA is April 15 of the year AFTER the year for which the contribution made.

So for Year 2015, you have until April 18, 2016 to fund your IRA.

If you’ve already invested the maximum (more about that in a moment) by December 31, 2015, then there is no more to do. You can’t put in any more money into the IRA for 2015, but if you haven’t maxed out your IRA, you have until April 18 to do that.

This brings me to:

BENEFIT #3: The Maximum Contribution Amounts have been increasing f
or many years. The most you could put into an IRA was $2,000. Now, the maximum is $5,500. (This assumes that you have at least that much earned income from wages or self-employment income).

And if you are over 50, you can put in another $1,000, bringing the total maximum to $6,500.

A married couple, both age 50 or older, can put a whopping $13,000 per year into a IRA. Not too bad if I say so myself.

Here is a final point about the Roth IRA rules: For a married couple, you can only contribute the maximum of $5,500 or $6,500 if your combined income is less than $183,000.

If you are single or head of household, you can contribute the maximum if your income is less than $116,000.
For most of us who are considered to be in the middle-class who are looking for a perfectly legal way to permanently avoid tax (rather then merely temporarily postpone tax), the Roth IRA is exactly what we need.

How do you get started on this? Well this is the hard part. Let’s examin how to actually implement this tax avoidance strategy.

“We’d like to save as much as we can for our golden years. But $11,000 a year? It’s hard to put aside that kind of money. We need every dollar we make just to pay the bills.” This could be your situtation, but a tax advisor or fund manager might find it easy to lecture you on why you should do it anyway. Realistically though; You’ve got to begin at some point, and you’ve got to start saving something, don’t you?

If you’d like to save for retirement, but think you can’t, it may be because you need to learn how to budget your money correctly.  Also learn about other ways to boost your retirement income, check out this website:

BOOST YOUR RETIREMENT INCOME

Learn from this resource or other sources and go for it!

22,019 Replies to “The Easy And Legal Way To Turn Taxable Income Into Tax-Free Income”

  3. I do not even know the wway I finished up right here, but I thought this publish
    was once good. I do not recognise who you are however definitely you are going to a well-known blogger for those
    who aree not aleady 😉 Cheers!

  4. I savor, lead to I found just what I was looking
    for. You’ve ended my 4 day lengthy hunt! God Bless you man. Have a nice day.
    Bye

  7. Hi there! I could have sworn I’ve been to this website before but after reading through some of the post I realized it’s new to me.

    Anyways, I’m definitely happy I found it and
    I’ll be bookmarking and checking back frequently!

  11. What i do not understood is in truth how you’re no longer actually a
    lot more smartly-preferred than you may be right now.
    You’re so intelligent. You recognize therefore significantly with regards to this topic, produced
    me in my opinion consider it from so many varied angles. Its like women and
    men don’t seem to be fascinated unless it’s something to accomplish with Girl gaga!
    Your own stuffs excellent. Always care for it up!

  12. I have been exploring for a little bit for any high-quality articles or weblog posts
    in this sort of area . Exploring in Yahoo I finally
    stumbled upon this web site. Studying this information So
    i’m happy to convey that I have an incredibly good uncanny feeling I discovered
    just what I needed. I so much certainly will make sure to do not put out of your
    mind this web site and give it a look regularly.

  14. Great post. I was checking constantly this blog and I am impressed!
    Very helpful info particularly the last part 🙂 I care
    for such information much. I was seeking this certain information for a long time.

    Thank you and good luck.

  15. I am not sure where you’re getting your information, but good topic.
    I needs to spend some time learning much more or understanding more.
    Thanks for wonderful information I was looking
    for this info for my mission.

  20. Hello there, just became alert to your blog through Google, and found that it is truly informative.
    I am gonna watch out for brussels. I’ll appreciate
    if you continue this in future. Numerous people will be
    benefited from your writing. Cheers!

  23. Have you ever thought about including a little bit more than just your articles?
    I mean, what you say is important and everything. However imagine if you added some great visuals or video clips to give your posts more, “pop”!
    Your content is excellent but with pics and videos, this website could definitely
    be one of the most beneficial in its niche.Fantastic blog!

  24. Superb post but I was wondering if you could write a litte more on this topic?
    I’d be very thankful if you could elaborate a little bit further.
    Cheers!

  26. Wow, fantastic blog format! How lengthy һave you beеn blogging for?
    you make running a blog lopok easy. Ƭһe entire liok of ｙour web siote іs
    magnificent, ⅼet alone the content material!

  29. Pretty section of content. I just stumbled upon your web site and in accession capital to assert that I acquire actually enjoyed account your blog posts.
    Anyway I’ll be subscribing to your augment and even I
    achievement you access consistently rapidly.

  31. Pingback: womens boots

  32. El mayor embolado empieza al tiempo que se disminuye la ingesta de nutrientes necesarios en la privación, igualmente si se realiza
    migaja a carencia de práctica podemos conservarse a latir una
    existencia sedentaria y chispa sano.

  34. Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point.

    You clearly know what youre talking about, why throw away your intelligence on just posting videos to
    your blog when you could be giving us something enlightening to
    read?

  35. Wonderful beat ! I would like to apprentice whilst you amend your website, how could i subscribe for
    a blog web site? The account aided me a applicable deal.
    I have been tiny bit familiar of this your broadcast provided shiny
    clear concept

  36. Thanks , I’ve just been looking for information about
    this subject for a while and yours is the greatest I’ve discovered so far.
    But, what about the bottom line? Are you positive concerning the
    source?

  39. 먹튀검증 토토사이트 에이블입니다. 신규는 물론 오픈된 먹튀사이트를 철저히 검증하여 먹튀없는 시대를 만들어가고 있습니다.
    토토를 사랑하는 여러분의 많은 호응바랍니다.
    여러분의 충실한 토토사이트가 되도록 노력하겠습니다.

  41. I loved as much as you’ll receive carried out right here.
    The sketch is attractive, your authored material stylish.
    nonetheless, you command get got an nervousness over that you wish be delivering
    the following. unwell unquestionably come further formerly again as
    exactly the same nearly a lot often inside case you shield this increase.

  45. Awesome blog! Do you have any suggestions for aspiring
    writers? I’m hoping to start my own website soon but I’m
    a little lost on everything. Would you suggest starting with a free platform like WordPress or go for a paid option? There
    are so many choices out there that I’m completely overwhelmed ..
    Any suggestions? Kudos!

  47. I needed to write you that bit of note in order to
    thank you so much over again relating to the magnificent ideas
    you’ve featured in this case. This is quite seriously open-handed
    with people like you to allow freely all that many people
    would’ve made available for an ebook to get some cash for themselves,
    most notably seeing that you might well have tried it if
    you ever considered necessary. These inspiring ideas also served like
    a fantastic way to be aware that some people have the identical zeal really like my
    very own to know the truth lots more when it comes to this matter.
    I believe there are lots of more fun opportunities ahead for individuals
    that read your site.

  48. Its like you read my mind! You appear to understand a lot approximately this, like you wrote the
    e book in it or something. I feel that you simply can do with a few
    percent to drive the message home a bit, however instead of
    that, this is magnificent blog. A great read. I’ll definitely be back.

Leave a Reply

Discover more from Small Business Paths

Subscribe now to keep reading and get access to the full archive.

Continue reading