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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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

  6. I do accept as true with all of the concepts you have offered in your post.
    They are really convincing and can definitely work.
    Nonetheless, the posts are very short for beginners.
    May just you please prolong them a bit from next time?
    Thanks for the post.

  7. I think that everything published was actually very logical.

    However, think on this, what if you added a little information? I am not saying your
    information is not good., but what if you added a title that
    grabbed people’s attention? I mean The Easy And Legal Way To
    Turn Taxable Income Into Tax-Free Income – Small Business Paths is a little plain.
    You should peek at Yahoo’s front page and note how they create news titles to grab viewers interested.
    You might add a video or a pic or two to grab readers interested about
    everything’ve written. In my opinion, it could make your posts a little livelier.

  8. I really like what you guys are usually up too.
    Such clever work and exposure! Keep up the superb works guys I’ve added you
    guys to my blogroll.

  10. Pretty section of content. I just stumbled upon your weblog
    and in accession capital to assert that I get in fact enjoyed account your blog posts.
    Anyway I’ll be subscribing to your augment and even I achievement you
    access consistently rapidly.

  11. It is the best time to make some plans for the future
    and it’s time to be happy. I’ve read this post and if I could I want to suggest you few interesting things or suggestions.
    Maybe you can write next articles referring to this article.

    I desire to read more things about it!

  12. I think this is one of the most important info for me.
    And i am glad reading your article. But wanna remark on few general
    things, The website style is great, the articles is really nice : D.
    Good job, cheers

  13. I’m curious to find out what blog system you’re working
    with? I’m having some small security problems with my latest site
    and I would like to find something more safeguarded.
    Do you have any suggestions?

  14. Definitely believe that which you stated. Your favorite reason seemed
    to be on the web the easiest thing to be aware
    of. I say to you, I definitely get annoyed while people consider worries that they plainly do
    not know about. You managed to hit the nail upon the top as well
    as defined out the whole thing without having side-effects ,
    people can take a signal. Will likely be back to get more.

    Thanks

  16. Have you ever thought about including a
    little bit more than just your articles?

    I mean, what you say is valuable and everything.
    But just imagine if you added some great photos
    or video clips to give your posts more, “pop”!
    Your content is excellent but with pics and videos, this website could certainly be
    one of the very best in its niche. Great blog!

  20. Oh my goodness! Impressive article dude! Thank you so much, However I am going through issues with your RSS.
    I don’t understand why I can’t subscribe to it. Is
    there anybody else having identical RSS problems? Anyone
    that knows the answer can you kindly respond?
    Thanks!!

  22. Definitely believe that that you stated. Your favorite reason seemed to be on the net the simplest thing to take into account of.

    I say to you, I certainly get annoyed while people think about issues that they
    just don’t recognize about. You controlled to hit the nail upon the top as neatly as
    defined out the entire thing with no need side-effects , folks
    can take a signal. Will probably be again to get more.

    Thank you

  24. I used to be recommended this blog by means of my cousin. I’m now not positive whether or not this publish
    is written by means of him as nobody else understand such detailed approximately my problem.
    You are wonderful! Thank you!

  25. Heya! I’m at work surfing around your blog from my new iphone 3gs!

    Just wanted to say I love reading your blog and look forward to all your
    posts! Keep up the superb work!

  30. I am not sure where you’re getting your information, but great topic.
    I needs to spend some time learning more or understanding more.
    Thanks for magnificent info I was looking for this
    information for my mission.

  32. Pingback: 1Ficher
  34. Pingback: Generator

  36. Hello, i read your blog from time to time and i own a
    similar one and i was just wondering if you get a lot
    of spam responses? If so how do you reduce it, any plugin or anything you can recommend?

    I get so much lately it’s driving me insane so
    any help is very much appreciated.

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

  38. What i don’t realize is in fact how you’re no longer actually much more well-appreciated than you might be now.
    You are so intelligent. You know thus significantly in the case of this topic,
    made me in my opinion consider it from so many
    varied angles. Its like men and women don’t seem to be involved until it’s something to do with
    Girl gaga! Your own stuffs excellent. All the time deal with it up!

  39. Pingback: Maltese Puppies For Sale
  40. Pingback: Maltipoo Puppies for sale
  42. Pingback: Shih Tzu Puppies
  43. Pingback: Australian Shepherd

  44. An impressive share! I’ve just forwarded this onto a colleague who had been conducting a
    little research on this. And he actually bought me dinner due to the fact that I
    found it for him… lol. So allow me to reword this….
    Thank YOU for the meal!! But yeah, thanx for spending some time to talk about this
    matter here on your web site.

  45. Do you have a spam problem on this blog; I also am a blogger, and I was wanting to know
    your situation; we have developed some nice procedures and we are looking
    to exchange strategies with other folks, why not shoot me an email if interested.

  46. May I simply just say what a comfort to uncover an individual who
    really understands what they’re discussing over the internet.

    You definitely understand how to bring an issue to light
    and make it important. A lot more people have to check this out and understand this side of the story.
    I was surprised that you aren’t more popular since you surely possess the gift.

  49. Pingback: Shiba Inu Puppies For Sale Near Me

Leave a Reply

Discover more from Small Business Paths

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

Continue reading