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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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

  4. Admiring the hard work you put into your blog and
    in depth information you present. It’s awesome to come across
    a blog every once in a while that isn’t the same old rehashed information.
    Fantastic read! I’ve saved your site and I’m adding your RSS
    feeds to my Google account.

  5. Hello there! This is my 1st comment here so I just wanted to give a
    quick shout out and say I really enjoy reading your
    articles. Can you suggest any other blogs/websites/forums that deal
    with the same subjects? Thanks for your time!

  6. I think this is one of the so much important info for me.
    And i am glad studying your article. However
    want to statement on some basic issues, The site taste is
    great, the articles is truly excellent : D. Just right activity,
    cheers

  7. Hi there, just became alert to your blog through Google, and found that
    it is really informative. I am gonna watch out for brussels.
    I will appreciate if you continue this in future.
    A lot of people will be benefited from your writing.
    Cheers!

  8. Useful information. Fortunate me I found your website by accident, and I am shocked why this coincidence did not came about in advance!
    I bookmarked it.

  9. Pingback: Strawberry Cough Strain

  10. I’ve read several excellent stuff here. Certainly value bookmarking for revisiting.
    I surprise how much attempt you put to make this type
    of magnificent informative site.

  12. Greetings! I’ve been following your site for a long time now and finally got the
    courage to go ahead and give you a shout out from
    Atascocita Tx! Just wanted to mention keep up the great job!

    Here is my blog หวย

  15. Can I simply say what a comfort to discover somebody who genuinely
    understands what they’re talking about online. You definitely realize
    how to bring an issue to light and make it important.
    More people should check this out and understand this side of your
    story. I was surprised you’re not more popular because you definitely possess the
    gift.

  18. Pingback: White Shark Strain

  20. I’m curious to find out what blog platform
    you are using? I’m having some minor security problems
    with my latest blog and I would like to find something more safeguarded.
    Do you have any suggestions?

  21. This design is steller! You obviously know how to keep a reader amused.
    Between your wit and your videos, I was almost moved to start
    my own blog (well, almost…HaHa!) Great job. I really loved what you had to say, and
    more than that, how you presented it. Too cool!

  22. Right here is the right webpage for anyone who wishes to find out about this topic.
    You realize a whole lot its almost hard to argue with
    you (not that I actually would want to…HaHa).
    You definitely put a brand new spin on a topic that’s been written about for ages.

    Great stuff, just wonderful!

  26. You actually make it seem so easy with your presentation but I find this matter to
    be actually something that I think I would never understand.

    It seems too complicated and very broad for me. I am looking
    forward for your next post, I’ll try to get the hang of it!

  28. That is a good tip particularly to those fresh to the blogosphere.

    Brief but very accurate info… Appreciate your sharing this one.
    A must read article!

  29. When someone writes an paragraph he/she retains
    the idea of a user in his/her mind that how a user can understand it.

    Therefore that’s why this paragraph is amazing.
    Thanks!

  31. Good exampⅼes are fruit, carrot sticks, sⅼіces of bаnana, mashed potato
    аnd ѕoft biscuіts like Ꮢusks. Wіth regard to forward-facing carsеats, your child’s ear lobes needѕ
    to be underneath the top portion ᧐f a seɑt.
    Mastitis might well be the most distressful probⅼеm you could receivе an internet to breastfeeding.

    Stօp by my web-site … Szklana Gablota

  33. Pingback: Cherry Pie Strain

  34. Great site you have here.. It’s hard to find quality writing like yours
    nowadays. I truly appreciate individuals like you!
    Take care!!

  35. After exploring a handful of the articles on your site, I honestly like your technique
    of blogging. I book marked it to my bookmark site list
    and will be checking back in the near future. Please check out my web site as
    well and let me know what you think.

  36. Howdy I am so thrilled I found your website, I really found you by mistake, while I was browsing on Aol for something else,
    Regardless I am here now and would just like to say many thanks for a fantastic post and a all
    round exciting blog (I also love the theme/design),
    I don’t have time to read it all at the minute but I have bookmarked
    it and also added in your RSS feeds, so when I have time
    I will be back to read a lot more, Please do keep up the
    excellent work.

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

  40. Pingback: Gorilla Glue No 4 Strain

  41. May I simply just say what a comfort to discover an individual who genuinely understands what they’re discussing
    on the internet. You definitely know how to bring an issue to light and make it important.
    More and more people need to look at this and understand this side of your story.
    I was surprised that you are not more popular since you surely possess
    the gift.

  42. Your method of explaining everything in this article is really fastidious, every one
    be able to without difficulty know it, Thanks a lot.

  44. Pingback: Alien Kush Strain

  47. Hey I know this is off topic but I was wondering if you
    knew of any widgets I could add to my blog that automatically tweet my newest twitter updates.
    I’ve been looking for a plug-in like this for quite some time and was
    hoping maybe you would have some experience with
    something like this. Please let me know if you run into anything.
    I truly enjoy reading your blog and I look forward to your new updates.

  48. I’m no longer positive the place you’re getting your info, but great topic.
    I needs to spend a while learning more or working out more.
    Thanks for excellent information I used to be on the lookout for this
    information for my mission.

  49. Thank you for the good writeup. It in fact was a
    amusement account it. Look advanced to far added agreeable from you!

    However, how could we communicate?

  50. Pingback: Cannatonic Strain

Leave a Reply

Discover more from Small Business Paths

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

Continue reading