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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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. Can I simply just say what a relief to uncover someone who truly understands what they are discussing on the web.
    You certainly know how to bring a problem to light and
    make it important. More people ought to read this and understand this side of the story.
    I was surprised you are not more popular because you certainly possess the
    gift.

  4. Everything posted was actually very reasonable.
    But, what about this? suppose you added a little content?
    I am not suggesting your information isn’t solid, however suppose you added
    a headline that grabbed people’s attention? I mean The Easy And
    Legal Way To Turn Taxable Income Into Tax-Free Income | Small Business Paths is kinda boring.
    You could peek at Yahoo’s front page and watch how they write
    post headlines to grab people to click. You might add a video or
    a picture or two to get people excited about everything’ve written. Just my opinion, it would make your posts a little bit more interesting.

  7. *Hey, you used to write wonderful, but the last few posts have been kinda boring… I miss your tremendous writings. Past few posts are just a little out of track! come on!

  9. Most people think they certainly well to consider 1,000 or 2,000 IU of vitamin D a day.
    Soy bean contains abundant plant protein, isoflavones and dietary
    fibers therefore it may beautify your skin and
    lower the extra weight for the human body. If contact with sunlight is minimal
    or the skin is real dark this will likely also place you at a greater risk of developing a deficiency.

  12. Hey there just wanted to give you a quick heads up. The text in your article seem to be running off the screen in Safari.
    I’m not sure if this is a formatting issue or something to
    do with web browser compatibility but I figured I’d post
    to let you know. The style and design look great though!
    Hope you get the problem resolved soon. Cheers

  14. Hello everyone, it’s my first go too see at this
    web page, and piece of writing iis truly fruitful in favor
    of me, keep up posting such content.

  17. Bursa evden eve nakliyat şirketimiz şehiriçi ve şehirler arası ev eşyası taşımada öncü ve eski firma olmakla kaliteli hizmet veren asönsörlü ev taşıması yapan Karacabey’in en büyük firmasıdır.Ekonomik ve uygun fiyatla ev taşımacılık bizim işimizdir.Hızlı ve güvenilir bir evden eve şirketi ile çalışmak için K1 yetki.belgesi olması çok önemlidir.Günümüzde özellik yaz sezonunda evden eve taşımacılık korsan çalışan çok firma vardır.Bu kişiler ev eşya taşımasında sorun yaşayabileğiniz kişililer mutlaka K1 belgesini isteyiniz.Kaliteli hızlı sorunsuz taşımada tek adres biziz mutlaka diyat alınız.

  18. Before stepping into the long-term of happiness, there will always be 4 periods that many pairs must experience.
    Sweet rewards (positive or negative) can cause children to desire unhealthy food to ensure they are feel better in their adult lives, and lead to obesity.
    therefore the collapse worsens, we could end up being bound to grains and
    water”.

  19. Unique Manuka Factor (UMF)This factor reflects the strength of the nectar
    and its ability to master aspects of health and fitness.
    It has antioxidant properties at the same time, which serve to protect your skin from the sun, too as help
    the skin in repairing itself. therefore if the collapse worsens, we
    might end up being saddled with grains and water”.

  21. When there are raw crises ancients use to generate a paste from
    oatmeal (which can easily created by mixing water
    and oatmeal). Clandestine real natural bee honey
    bees carry in their bodies and organs to digest that the product is transformed into medicine
    almost indispensable in human nutrition. What I personally love isn’t just would you reap
    directly every one of the benefits of pollination of nearby fields and gardens however, you will also be capable of share your
    individual delicious honey products with friends and family.

  24. Like Mom always told us breakfast is a vital meal in the day.
    If you’ve any health conditions, or else you take medications or supplements, it’s a wise idea
    approach your medical professional or pharmacist.

    so if the collapse worsens, we will end up being saddled with grains and water”.

  25. Unique Manuka Factor (UMF)This factor reflects the effectiveness of the nectar and its ability to excel
    in aspects of health insurance fitness. Sweet rewards (bad or good) might cause children to desire unhealthy foods
    to make them feel great throughout their adult lives, and
    lead to obesity. Do not add an excessive amount of pressure; this may avoid cutting the cuticle inside
    a matter that will cause bleeding.

  28. Ankara nakliyat sektörü ülkenin en göz bebeği durumundadır. Gerek coğrafi yapısı gerekse de nüfusu bakımından nakliyatın kalbi durumunda olan bu şehirde taşımacılık oldukça önemli bir yere sahiptir. Bundan dolayıda Ankara nakliyat firmaları sayısı oldukça fazla ve üzerlerine düşen görev bir o kadar fazladır. Bu bilgiler doğrultusunda hareket ederek kullanışmlı bir uygulama planlayarak Ankara nakliyat platformu uygulamamızı devreye soktuk. Hem müşterilerin hemde nakliyecilerin yararına olan sitemiz sayesinde nakliye süreçlerinde oluşan sorunları tamamen ortadan kaldırmış durumdayız. Ankara evden eve nakliyat hizmetine ihtiyaç duyan müşterileri en iyi Ankara nakliyat şirketleriyle buluşturarak profesyonel çalışmalar elde etmekteyiz. Nitekim ki binlerce mutlu müşteriyle sektörün lider platformu olmayı çok kısa sürede başardık.

    https://ankaranakliyat.web.tr/

  30. Pretty nice post. I just stumbled upon your weblog and wished to
    say that I have really enjoyed browsing your blog posts.
    After all I will be subscribing to your feed
    and I hope you write again soon!

    finanzas personales (Vince)

  32. I like the valuable info you supply in your articles.
    I’ll bookmark your blog and check once more right here frequently.
    I’m moderately sure I will be told many new stuff right
    right here! Good luck for the following!

  34. I delight in, lead to I found exactly what I was taking a look
    for. You have ended my 4 day long hunt! God Bless you man. Have a nice day.

    Bye

  35. Hi there, I discovered your web site by way of Google
    at the same time as looking for a related matter, your site got here up, it looks good.
    I have bookmarked it in my google bookmarks.

    Hello there, just turned into aware of your blog thru Google,
    and located that it’s really informative. I am going to be careful for brussels.
    I will be grateful in the event you proceed this in future.
    A lot of people will probably be benefited out of your writing.

    Cheers!

  37. This is really interesting, You are a very skilled blogger.
    I’ve joined your feed and look forward to seeking more of your fantastic post.
    Also, I’ve shared your web site in my social networks!

  40. I think that what you posted was actually very
    reasonable. But, think on this, suppose you wrote a catchier post title?
    I ain’t suggesting your information isn’t good.,
    but what if you added a title that makes people
    want more? I mean The Easy And Legal Way To Turn Taxable Income Into Tax-Free Income | Small Business Paths is a little plain. You could peek at Yahoo’s front page
    and see how they create article headlines to get viewers to click.
    You might add a related video or a pic or two to grab readers interested about what you’ve written. Just my opinion, it
    might make your blog a little livelier.

  41. Have you ever considered about including a little bit more than just your articles?
    I mean, what you say is important and everything. But think about if you added some great images or videos to give your posts more, “pop”!
    Your content is excellent but with images and videos,
    this site could undeniably be one of the best in its field.
    Fantastic blog!

  42. What’s Going down i’m new to this, I stumbled upon this I
    have found It absolutely helpful and it has helped me out loads.
    I’m hoping to give a contribution & assist other customers like its helped me.
    Good job.

  43. Excluding entire asset classes generally is a tough sell, some financial
    advisers say. Investors should be asking instead
    whether a good thing class is performing simply because it should.

    “You can come up with a low-volatility portfolio
    of hedge funds, and they’ll end up consistent return,” Mr.
    Stackman of UBS said. “But you’re failing to get enough the
    generous returns the S. & P. have been giving you since 2009.”

    That will be around 2 percent annually for hedge funds versus about 18 percent for that S.
    & P. 500. And many asset classes are in possession of stood a good run.

    There’s another cautionary argument on private investments.
    Since they are inherently risky, they must be undertaken only through the most experienced investors.

    Michael W. Sonnenfeldt, founder and chairman of Tiger 21, a wise investment club
    for people who have $10 million to $1 billion, said the group’s 630
    members had increased their investments in private equity and real estate.

  44. Do you have a spam problem on this website; I also am a blogger,
    and I wwas curious about your situation; many oof us have developed
    some nice methods andd we are looking to eexchange techniques with other folks, please shoot me an e-mail if interested.

  45. Have you ever considereed about adding a little bit moe than just our articles?
    I mean, what you say is fundamental and all. However just imwgine
    if you added some greawt pictures or video clips to
    give yoiur plsts more, “pop”! Your content is excellent but with pics and
    clips, this blog could certainly be one of the best in its field.
    Fantastic blog!

  48. Thanks for some other excellent post. The place else could anyone get that
    type of info in such an ideal manner of writing?
    I have a presentation subsequent week, and I am on the
    look for such info.

  50. Attractive section of content. I just stumbled upon your log annd iin accession capital to assert that
    I acquire in fact enjoyed account your blog posts. Anyway
    I’ll be subsfribing too your feeds and even I achievement you access consistently fast.

Leave a Reply

Discover more from Small Business Paths

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

Continue reading