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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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

  1. hello there and thank you for your information – I have definitely picked up
    anything new from right here. I did however expertise several technical issues using this website, as
    I experienced to reload the website a lot of times previous to
    I could get it to load properly. I had been wondering if your
    hosting is OK? Not that I am complaining, but sluggish loading instances times will sometimes affect your placement
    in google and could damage your high quality score if ads and marketing with Adwords.
    Anyway I’m adding this RSS to my e-mail and can look out for
    much more of your respective intriguing content. Make sure you update this again soon.

  2. Wonderful blog! Do you have any helpful hints for aspiring writers?
    I’m planning to start my own site soon but I’m a
    little lost on everything. Would you recommend starting with a free platform like WordPress or go for a paid option? There
    are so many options out there that I’m completely overwhelmed ..
    Any ideas? Thank you!

  5. Hey there! I know this is somewhat off topic but
    I was wondering which blog platform are you using for this website?
    I’m getting sick and tired of WordPress because I’ve had problems
    with hackers and I’m looking at alternatives for another platform.
    I would be awesome if you could point me in the direction of a good platform.

  6. Great website you have here but I was wanting to know
    if you knew of any message boards that cover the same topics discussed here?
    I’d really like to be a part of group where I can get comments from other knowledgeable people that share
    the same interest. If you have any recommendations, please let me know.
    Thank you!

  7. Terrific work! This is the kind of info that are supposed to be shared around the net.

    Disgrace on Google for not positioning this post higher!
    Come on over and talk over with my web site . Thanks =)

  8. You need to be a part of a contest for one of the
    greatest blogs online. I’m going to highly recommend this blog!

  9. Having read this I believed it was very informative. I appreciate
    you finding the time and effort to put this information together.
    I once again find myself spending a lot of time both reading and leaving comments.
    But so what, it was still worthwhile!

  11. I’m curious to find out what blog system you’re utilizing?
    I’m having some minor security problems with my latest website and I’d like to find something more safeguarded.
    Do you have any recommendations?

  12. What’s up to all, how is everything, I think every one
    is getting more from this web site, and your views are nice designed for new users.

  13. I’m not sure exactly why but this web site is loading incredibly slow for me.
    Is anyone else having this problem or is it a issue on my end?
    I’ll check back later on and see if the problem still exists.

  15. I have learn a few just right stuff here.
    Certainly worth bookmarking for revisiting. I surprise how a lot attempt
    you put to make this kind of great informative website.

  18. Fantastic post but I was wondering if you could write a litte more on this topic?
    I’d be very grateful if you could elaborate a little bit more.
    Bless you!

  22. magnificent put up, very informative. I wonder why the opposite
    experts of this sector don’t understand this. You should proceed your writing.
    I’m confident, you’ve a huge readers’ base already!

  25. Pretty section of content. I just stumbled upon your web site and in accession capital to assert that I get in fact enjoyed account your blog posts.
    Anyway I will be subscribing to your feeds and even I achievement you access consistently quickly.

  26. I like the helpful information you provide in your articles.
    I’ll bookmark your weblog and test once more right here regularly.
    I am relatively sure I’ll learn many new stuff proper right here!
    Good luck for the next!

  28. I don’t evеn knoᴡ how I eded ᥙp here, but I thought this
    post ԝas gоod. Ӏ Ԁο not knoԝ whoo үoᥙ are but Ԁefinitely ʏou’re going to a
    wel қnown blogger iin сase yߋu aren’t alreadʏ Manyy thankѕ!

    My site; testogen

  29. Just want to say your article is as astonishing. The
    clarity in your post is just spectacular and i can assume you
    are an expert on this subject. Well with your permission let me to
    grab your RSS feed to keep up to date with forthcoming post.
    Thanks a million and please keep up the rewarding work.

  30. It’s a pity you don’t have a donate button! I’d definitely donate to this brilliant blog!
    I suppose for now i’ll settle for bookmarking and adding your RSS feed to
    my Google account. I look forward to new updates and will talk about this site
    with my Facebook group. Talk soon!

  31. I am really happy to read this web site posts
    which carries tons of valuable information, thanks for providing such information.

  32. Greetings! Very useful advice within this post!
    It’s the little changes that make the most
    important changes. Many thanks for sharing!

  33. I got this web site from my buddy who told me on the topic of this site and at
    the moment this time I am visiting this web page and reading very informative articles or reviews at this time.

  36. Hello excellent blog! Does running a blog similar to this require a large
    amount of work? I’ve no understanding of programming but I was
    hoping to start my own blog in the near future.
    Anyways, if you have any ideas or tips for new
    blog owners please share. I know this is off subject nevertheless I simply wanted to ask.
    Cheers!

  39. all the time i used to read smaller content which also clear their motive, and that is
    also happening with this article which I am reading at this
    time.

  41. Such customization of user location is not available in any other chatting website that is available on the internet.
    If you want to make friends with the models or with any other user on the online chatting site, you can use the group chat facility.
    At any point of time, there would be hundreds of models live who can be checked out well by means of the group chat facility.
    There is a big difference between a person occasionally viewing pornography with the knowledge and even involvement of their partner to a full-blown betrayal and using adult websites to start affairs with other people.
    There are thousands of women and men using our random adult chat right now –
    connect by pressing start and have fun exploring! There is even more that entertainment freaks can expect
    to get from DISH Network programming. At the heart of
    the problem of online “infidelity” is the fact that it is usually done in secret and without the partner’s knowledge
    – even with infrequent access this secrecy can reduce the intimacy between the couple and can be
    a first step on the road to bigger betrayals.

  42. Very nice post. I just stumbled upon your weblog and
    wished to say that I have truly enjoyed browsing your blog posts.

    After all I’ll be subscribing to your feed and I am hoping
    you write again soon!

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

  47. First off I want to say terrific blog! I had a quick question that I’d like to ask if you don’t mind.
    I was interested to know how you center yourself and clear your head prior to writing.
    I have had a tough time clearing my thoughts in getting my
    thoughts out there. I do enjoy writing however it just seems like the first 10 to 15 minutes are usually lost just trying to figure out how to begin. Any suggestions or hints?
    Many thanks!

  48. Hey! I know this is kind of off topic but I was wondering which blog platform are you using for this site?
    I’m getting sick and tired of WordPress because I’ve had problems
    with hackers and I’m looking at alternatives for another platform.
    I would be awesome if you could point me in the direction of a good platform.

Leave a Reply

Discover more from Small Business Paths

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

Continue reading