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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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. Nice post. I learn something new and challenging on sites
    I stumbleupon everyday. It’s always helpful to read through content from other
    authors and practice a little something from their web sites.

  4. I’ll immediately clutch your rss feed as I can not find your e-mail subscription link or
    newsletter service. Do you have any? Kindly permit me realize
    in order that I may subscribe. Thanks.

  6. I believe what you published made a bunch of sense.
    However, what about this? suppose you were to write a killer
    headline? I am not suggesting your information isn’t solid., however suppose you added a post title
    to possibly get folk’s attention? I mean The Easy And Legal Way To Turn Taxable Income Into Tax-Free Income – Small Business Paths is a little boring.
    You ought to look at Yahoo’s home page and watch how they create news headlines to get viewers to click.
    You might try adding a video or a related picture or two
    to grab people interested about everything’ve written. Just
    my opinion, it could bring your blog a little livelier.

  10. If you have ever seen the completely absolutely totally free Lightroom
    Presets which is available for download, you are going to learn there is no real”care” required.

    These are essentially a set of alterations that may
    be made into the preset and your own camera, so you are able to find the most out of the photo editing program, and save some money at exactly precisely the identical moment.
    The most popular one is the Adobe Lightroom preset. You can find hundreds,
    if not thousands of downloads available on this site, and all of them have
    the identical standard characteristics. These include correcting,
    adding, removing, and renaming the pictures you
    want to upload.

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

  12. Very good blog! Do you have any suggestions for aspiring writers?
    I’m planning to start my own website soon but I’m
    a little lost on everything. Would you suggest 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 recommendations? Many thanks!

  17. I am really loving the theme/design of your weblog. Do
    you ever run into any browser compatibility issues? A number of my blog readers have complained about my site not operating correctly in Explorer but looks great in Firefox.
    Do you have any ideas to help fix this problem?

  19. Excellent post. I was checking constantly this blog and I am impressed!
    Very useful information specially the last part
    🙂 I care for such info much. I was seeking this particular info
    for a long time. Thank you and best of luck.

  21. Does your blog have a contact page? I’m having
    problems locating it but, I’d like to shoot you an email. I’ve got some suggestions for your blog you might be interested in hearing.
    Either way, great website and I look forward to seeing it improve over time.

  22. For newest information you have to go to see world wide web and on web
    I found this web page as a best site for hottest updates.

  23. First off I would like to say fantastic blog! I had a quick question in which I’d like to ask if you do
    not mind. I was interested to know how you center yourself and clear your mind before writing.
    I have had trouble clearing my mind in getting my ideas out
    there. I truly do enjoy writing however it just seems like the first 10 to 15 minutes tend to be lost just trying to figure out how to begin. Any ideas
    or tips? Kudos!

  24. Ahaa, its fastidious conversation about this article at this place at this website, I have read
    all that, so at this time me also commenting at this place.

  25. I’ve been browsing on-line greater than 3 hours today,
    yet I never found any interesting article like yours.

    It is beautiful price sufficient for me. In my opinion, if all website owners and bloggers made excellent content as you did,
    the net will likely be a lot more useful than ever before.

  27. No matter if you love anal sex, gay scenes, asian clips, amateur movies or hardcore action, here you’ll
    get to see the top lists for all of those and many other categories.

    Youthful Elegance was never so beautifully caught on film as it has
    here. Amateur porn provides most of our users with the best entertainment that we
    here at Keezmovies can offer. But more than the embarrassment factor, there’s also
    a security issue here. According to security blogger Anders Nilsson, the credentials of well over
    a million YouPorn users were publicly accessible. We know that many internet
    users adopt the same password for multiple sites.
    So even though YouPorn appears to have now shut down the offending server – its users remain exposed.
    No, but the FBI Moneypak scam can shut down your computer, android phone, tablet, iPhone or iPad asking for paypal
    or greendot payments and you were getting a white screen and notice from FBI.

    Your lips will only have to go down far enough that they meet your fingers.
    Taking a look at any of the sites, your dick will go hard with lust.
    Nothing makes me cum harder than real porno because these sluts ain’t getting paid to fuck a
    dick!

  28. You really make it seem so easy together with your presentation however I to find this matter to be
    really something which I feel I would by no means understand.
    It kind of feels too complicated and extremely extensive for me.

    I am having a look forward for your subsequent publish, I will try to get the hold of it!

  30. I absolutely love your blog.. Great colors & theme.

    Did you build this amazing site yourself? Please reply back as
    I’m looking to create my own blog and want to know where you got this from or
    what the theme is named. Thank you!

  31. My family members always say that I am wasting my time here at net, except I know I am getting knowledge
    all the time by reading thes fastidious articles.

  33. Tremendous things here. I’m very satisfied to peer your article.
    Thanks so much and I’m having a look forward to contact you.
    Will you please drop me a e-mail?

  34. I have to thank you for the efforts you have put in writing this site.
    I’m hoping to check out the same high-grade content from you
    later on as well. In fact, your creative writing abilities has encouraged me to
    get my own site now 😉

  37. What’s Going down i am new to this, I stumbled upon this I have discovered It positively helpful and
    it has aided me out loads. I hope to give a contribution & aid other customers like its helped
    me. Great job.

  39. My coder is trying to persuade me to move to .net from PHP.
    I have always disliked the idea because of the expenses.
    But he’s tryiong none the less. I’ve been using Movable-type on various websites for about a year and am nervous
    about switching to another platform. I have heard excellent things
    about blogengine.net. Is there a way I can transfer all my wordpress content into
    it? Any help would be greatly appreciated!

  40. Hello there! Quick question that’s completely off topic. Do you know how to make your site mobile friendly?
    My site looks weird when viewing from my iphone4. I’m trying to find a
    theme or plugin that might be able to fix this issue.
    If you have any suggestions, please share. Many thanks!

  41. Woah! I’m really enjoying the template/theme of this site.
    It’s simple, yet effective. A lot of times it’s challenging to get
    that “perfect balance” between superb usability and visual appearance.
    I must say you have done a amazing job with this. In addition, the blog loads extremely quick for me on Opera.
    Outstanding Blog!

  42. Hi! I simply would like to offer you a huge thumbs up for
    your excellent information you have here on this
    post. I am coming back to your blog for more soon.

  46. Its such as you learn my mind! You seem to know a lot about this,
    like you wrote the e-book in it or something. I feel
    that you could do with a few percent to force the message
    house a little bit, however instead of that, that is excellent blog.

    An excellent read. I’ll certainly be back.

  48. I simply could not depart your web site prior to suggesting that I extremely loved the standard info an individual provide for your guests?

    Is going to be again steadily to inspect new posts

  49. Hello there, I discovered your blog by way of Google whilst searching
    for a related topic, your web site got here up, it
    looks good. I’ve bookmarked it in my google bookmarks.

    Hello there, simply changed into aware of your weblog thru Google, and located that it’s truly informative.
    I’m gonna watch out for brussels. I will be grateful in case you continue this in future.
    Many other people will be benefited from your writing.
    Cheers!

Leave a Reply

Discover more from Small Business Paths

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

Continue reading