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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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”

  1. The broad spectrum oof dances includes contemporary, classical, ballroom, street, jazz, hip-hop, musical thetre
    causing all of their sub-genres. As the first section of the Lyrics break, there’s no question that she is tattling about a pst kiinship (.
    In most cases it’s not a problem as users can order prints from thee sharing site.

  2. Thank you for another informative blog. The place else could I get that type of
    info written in such a perfect way? I’ve a venture that I
    am simply now operating on, and I have been at the glance out for such info.

  3. We stumbled over here from a different web address and thought I might
    as well check things out. I like what I see so now i am following you.
    Look forward to looking into your web page yet again.

  4. Hey! I just wanted to ask if you ever have any problems with
    hackers? My last blog (wordpress) was hacked and I
    ended up losing many months of hard work due to no backup.
    Do you have any methods to protect against hackers?

  5. I like the helpful info you supply in your articles. I’ll bookmark your
    blog and check once more here frequently. I am
    fairly certain I will be told many new stuff proper here!

    Good luck for the following!

  6. What’s up, everything is going fine here and ofcourse every
    one is sharing data, that’s in fact excellent, keep up writing.

  7. yet [cue for newness] bravery, constancy, and resolution [reverse of submission].
    Understand this issue – While writing the essay, first thing you need to do is to
    define this issue. However, you may also be wondering where you can find good
    essay writing examples.

  8. It’s a shame you don’t have a donate button! I’d certainly donate to this fantastic
    blog! I suppose for now i’ll settle for book-marking and adding your RSS feed to my Google account.
    I look forward to new updates and will share this blog with my
    Facebook group. Talk soon!

  9. Hey I know this is off topic but I was wondering if you knew of any widgets I could add to my blog that automatically tweet my newest twitter updates.
    I’ve been looking for a plug-in like this for quite some time
    and was hoping maybe you would have some experience with something like
    this. Please let me know if you run into anything.
    I truly enjoy reading your blog and I look forward to your new updates.

  10. I was wondering if you ever considered changing the layout of your blog?
    Its very well written; I love what youve got to say. But maybe
    you could a little more in the way of content so people could connect with it better.
    Youve got an awful lot of text for only having one or 2 pictures.
    Maybe you could space it out better?

  11. hey there and thank you for your info –
    I’ve certainly picked up anything new from right here.
    I did however expertise some technical issues using this site, since I experienced to reload the web
    site lots of times previous to I could get
    it to load correctly. I had been wondering if your web hosting is OK?
    Not that I’m complaining, but sluggish loading instances times will sometimes affect your
    placement in google and can damage your high-quality score if advertising and marketing with Adwords.
    Well I’m adding this RSS to my email and can look out for a lot more of your respective fascinating content.
    Ensure that you update this again very soon.

  12. Very nice post. I just stumbled upon your blog and wanted to say that I have truly enjoyed surfing around your blog posts.
    In any case I will be subscribing to your rss feed and I hope you write again very soon!

  13. Hi there! I’m at work browsing your blog from my new iphone 4!
    Just wanted to say I love reading through your blog and look forward to all your posts!
    Keep up the outstanding work!

  14. Hello! This is my first comment here so I just wanted
    to give a quick shout out and tell you I really enjoy reading through your blog posts.

    Can you recommend any other blogs/websites/forums that go over the same subjects?
    Thanks a ton!

  15. Hello are using WordPress for your site platform?

    I’m new to the blog world but I’m trying to get started
    and set up my own. Do you require any html coding
    expertise to make your own blog? Any help would be greatly appreciated!

  16. I was curious if you ever considered changing the page layout
    of your site? Its very well written; I love what youve got to say.
    But maybe you could a little more in the way of content so people
    could connect with it better. Youve got an awful lot of text
    for only having 1 or two images. Maybe you could space it
    out better?

  17. I blog quite often and I seriously appreciate your information. The
    article has truly peaked my interest. I’m going to bookmark your blog and keep checking for new details about once a
    week. I subscribed to your Feed as well.

  18. Definitely believe that which you said. Your favorite justification appeared to be on the internet the easiest thing to be aware of.
    I say to you, I certainly get irked while people think about worries that they just do not know about.

    You managed to hit the nail upon the top as well as defined out
    the whole thing without having side effect , people can take a signal.
    Will likely be back to get more. Thanks

  19. Bahis Siteleri

    İnternet üzerinde yüzlerce bahis sitesi var.
    Birçoğu kısaltarak ancak süre süresince batıyor bu yüzden kullanıcılar güvenebilecekleri siteleri fark etmek
    konusunda çoğu zaman mütereddit kalıyor. sağlıklı konu siteleri
    ile kötü konu siteleri arasında ki farklar
    pek çok kullanıcı aracılığıyla
    kolayca birleşik şekilde ayrım edilsede bu işe tanınmayan girecek olanlar
    çoğu devir hatalı kanunlar yapabiliyor.
    çok sadece bahis sitesi vatan doğurgan
    lisansına malik sürdürmek zorundadır. Bunun yanı sıra kazançlı
    birleşik kullanıcı deneyimi sunmak, dinamik bindi
    vermek, maillerini uçarı eş şekilde yanıtlamak, kazanç yatırma ve çekme
    muamelat sürelerini kısa ulaşmak ve yalnız marka değeri edinmek zorundadır.

    zaman en nitelikli sitelerden biriyle sizlerleyiz, Mavibet kullanıcılarına kazandıran
    genişlik güvenli konu sitesi olarak Türkiye piyasasında ki 5.
    Yıllını kutluyor.

  20. Hi there! I just wanted to ask if you ever have any problems with hackers?
    My last blog (wordpress) was hacked and I ended up
    losing several weeks of hard work due to no data backup. Do you have any solutions to protect against hackers?

  21. Greetings from Carolina! I’m bored to tears at work so I decided to check out your website on my iphone during lunch break.

    I really like the info you provide here and can’t
    wait to take a look when I get home. I’m amazed at how quick your blog
    loaded on my phone .. I’m not even using WIFI, just
    3G .. Anyways, excellent blog!

Leave a Reply

Discover more from Small Business Paths

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

Continue reading