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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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. I’m impressed, I must say. Rarely do I come across
    a blog that’s equally educative and engaging, and let me tell you, you
    have hit the nail on the head. The issue
    is an issue that too few people are speaking intelligently
    about. I’m very happy that I came across this during my search for something
    regarding this.

  3. I have learn several excellent stuff here. Certainly price bookmarking
    for revisiting. I wonder how so much attempt you put to create such a great
    informative website.

  6. Terrific work! That is the type of info that should be shared around the net.
    Shame on Google for now not positioning this post upper!
    Come on over and discuss with my website . Thanks =)

  8. After I originally left a comment I appear to have clicked the
    -Notify me when new comments are added- checkbox and now whenever a comment is
    added I get 4 emails with the exact same comment. Is there a means you can remove me from
    that service? Appreciate it!

  10. With havin so much content and articles do you ever run into any problems of plagorism or copyright infringement?
    My website has a lot of completely unique content I’ve either authored myself
    or outsourced but it appears a lot of it is popping it up all over the web without my authorization. Do you know any ways to help
    prevent content from being ripped off? I’d definitely
    appreciate it.

  11. I got this web site from my friend who informed me regarding this
    site and at the moment this time I am visiting this web site and reading very informative content
    at this place.

  14. Wow that was unusual. I just wrote an extremely long comment but after I clicked submit my comment didn’t show
    up. Grrrr… well I’m not writing all that over again. Anyway, just
    wanted to say great blog!

  17. Simply wish to say your article is as surprising. The clearness to
    your put up is simply spectacular and i could assume you’re a professional on this subject.

    Fine with your permission let me to snatch your RSS feed to stay updated with forthcoming post.
    Thanks one million and please keep up the rewarding work.

  21. I will immediately seize your rss feed as I can’t find your email subscription link or e-newsletter service.
    Do you have any? Kindly permit me know so that I may just subscribe.

    Thanks.

  22. hello!,I like your writing very a lot! proportion we be in contact extra approximately
    your post on AOL? I need a specialist on this house to solve my problem.
    Maybe that is you! Taking a look forward to see you.

  23. Whoa! This blog looks exactly like my old one!
    It’s on a totally different topic but it has pretty much the same page
    layout and design. Wonderful choice of colors!

  26. Everything is very open with a really clear description of the issues.

    It was really informative. Your website is very helpful.
    Thank you for sharing!

  27. Hey! I know this is kinda off topic but I’d figured I’d ask.
    Would you be interested in trading links or maybe guest
    writing a blog post or vice-versa? My website discusses a lot of the same topics
    as yours and I think we could greatly benefit from each other.
    If you are interested feel free to shoot me an e-mail. I look forward to hearing from you!
    Terrific blog by the way!

  31. Thank you for some other excellent post.

    The place else may anyone get that kind of information in such a
    perfect means of writing? I have a presentation next week,
    and I’m on the look for such info.

  33. Just desire to say your article is as surprising. The clearness on your post is simply excellent and i can suppose
    you are knowledgeable on this subject. Well
    with your permission let me to take hold of your RSS
    feed to stay updated with impending post.
    Thank you 1,000,000 and please carry on the rewarding work.

  35. Having read this I thought it was very informative. I appreciate you spending
    some time and energy to put this content together. I once again find myself
    spending way too much time both reading and posting comments.
    But so what, it was still worth it!

  37. Hi there, I found your blog via Google even as
    searching for a related matter, your website came up, it looks great.
    I have bookmarked it in my google bookmarks.

  39. It’s in point of fact a great and helpful piece of info.
    I’m satisfied that you simply shared this useful information with us.

    Please stay us informed like this. Thanks for sharing.

  42. fantastic issues altogether, you simply received a new reader.

    What would you suggest in regards to your put up
    that you simply made a few days in the past? Any sure?

  43. I don’t even know how I ended up right here, but I believed this post used to be good.
    I do not know who you’re however definitely you are going to a well-known blogger if
    you are not already. Cheers!

  45. When I originally commented I clicked the “Notify me when new comments are added”
    checkbox and now each time a comment is added I get several
    emails with the same comment. Is there any way you can remove me from that service?
    Bless you!

  48. 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 weblog when you could be giving us something informative
    to read?

  49. Pingback: Drug Rehab Centers Near Me

  50. Thanks a bunch for sharing this with all people you actually recognize what
    you’re talking approximately! Bookmarked. Kindly additionally discuss
    with my website =). We can have a link exchange contract among us

Leave a Reply

Discover more from Small Business Paths

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

Continue reading