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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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

  2. Hello! I’ve been following your web site for some time now and finally got the courage
    to go ahead and give you a shout out from Houston Texas! Just wanted to tell you keep
    up the great job!

  3. Hi there, all the time i used to check website posts here
    early in the dawn, as i enjoy to gain knowledge of more and
    more.

  5. Asking questions are really pleasant thing if
    you are not understanding anything totally, except this article offers nice understanding yet.

  9. I don’t even know how I ended up here, but I thought this post was great.
    I don’t know who you are but definitely you are going
    to a famous blogger if you aren’t already 😉 Cheers!

  11. Excellent beat ! I would like to apprentice while you amend your website, how could i subscribe for a blog
    site? The account aided me a acceptable deal. I had been a
    little bit acquainted of this your broadcast provided bright clear concept

  14. This paragraph will help the internet users for building up new website
    or even a blog from start to end.

  15. Hello! Someone in my Myspace group shared this website with us
    so I came to give it a look. I’m definitely enjoying the information. I’m book-marking and will be
    tweeting this to my followers! Superb blog and brilliant design and style.

  16. Hi, I do think your web site might be having browser compatibility problems.
    Whenever I look at your site in Safari, it looks fine
    however when opening in IE, it’s got some overlapping issues.
    I merely wanted to provide you with a quick heads
    up! Aside from that, wonderful blog!

  17. This is the right blog for anybody who wants to find out
    about this topic. You realize so much its almost hard to argue with you (not that I personally will
    need to…HaHa). You definitely put a brand new
    spin on a topic that’s been written about for decades.
    Great stuff, just great!

  20. We absolutely love your blog and find most of your post’s to be just what I’m
    looking for. Does one offer guest writers to write content for you?

    I wouldn’t mind creating a post or elaborating on many of the subjects
    you write concerning here. Again, awesome web site!

  24. Hey there! Do you use Twitter? I’d like to follow you if that would be ok.
    I’m absolutely enjoying your blog and look forward to new updates.

  25. I do believe all of the ideas you have introduced
    in your post. They are really convincing and can definitely work.
    Nonetheless, the posts are too quick for novices. May you please extend them a bit
    from subsequent time? Thanks for the post.

  27. I’d like to thank you for the efforts you have put in writing this blog.

    I am hoping to view the same high-grade content by you later on as
    well. In fact, your creative writing abilities has motivated me to get my own, personal site now ;
    )

  28. I seriously love your site.. Excellent colors & theme. Did you
    create this website yourself? Please reply back as I’m
    attempting to create my own personal site and would love to find out where you got this from or what the theme is called.
    Cheers!

  30. Simply want to say your article is as astounding.
    The clearness foor your post is just nice and that i could think you’re a professional on this subject.
    Well together with your permission let me to grab your
    RSS fewd to stay updated with impending post.
    Thank you a million annd please continue the enjoyable work.

  31. Good day very cool web site!! Man .. Beautiful .. Superb ..
    I will bookmark your web site and take the feeds also?

    I am glad to find a lot of useful info here in the submit, we want
    develop extra strategies in this regard, thank you for sharing.
    . . . . .

  32. you are truly a good webmaster. The web site loading speed is amazing.
    It seems that you’re doing any unique trick. Moreover,
    The contents are masterpiece. you’ve done a excellent
    activity on this matter!

  35. Nhà phân phối các sản phẩm: PCMAX Máy trợ
    giảng, Máy lọc không khí, Bộ chia tín hiệu HDMI, Cáp HDMI,
    Ổ điện âm tường, âm sàn, HDMI không dây, Bộ chia HDMI, Bộ gộp HDMI,
    Bộ ghép màn hình

  36. I’m gone to convey my little brother, that he should also pay a visit this weblog
    on regular basis to obtain updated from hottest news.

  37. Hello, i believe that i noticed you visited my web site so i got
    here to return the favor?.I am trying to to find issues to enhance
    my website!I suppose its good enough to use a few
    of your ideas!!

  38. hi!,I really like your writing so much! share we keep in touch more about your post on AOL?

    I require an expert on this area to solve
    my problem. May be that is you! Looking forward to peer you.

  40. I got this web page from my pal who told me on the topic of this
    site and now this time I am browsing this web site and reading very informative content at this place.

  42. Good day! Would you mind if I share your blog with my facebook group?
    There’s a lot of people that I think would really appreciate your content.
    Please let me know. Many thanks

  44. hi!,I like your writing very so much! share we keep in touch extra
    about your article on AOL? I require a specialist
    on this area to solve my problem. Maybe that’s you! Looking forward to see you.

  45. Thanks for every other great post. The place else may anybody get that type of information in such a
    perfect approach of writing? I’ve a presentation subsequent week,
    and I’m on the search for such info.

  46. Wonderful goods from you, man. I have take into account your stuff previous to and
    you are simply too magnificent. I actually like what you’ve
    received here, really like what you are stating and the way in which during
    which you are saying it. You’re making it entertaining and you still take care of to stay it sensible.
    I can not wait to read far more from you. That is actually a great site.

  47. Great beat ! I wish to apprentice whilst you amend your website,
    how could i subscribe for a weblog site? The
    account aided me a acceptable deal. I had been tiny bit familiar of this your broadcast provided vivid transparent idea

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

Leave a Reply

Discover more from Small Business Paths

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

Continue reading