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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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:
Learn from this resource or other sources and go for it!
I have been browsing online more than 4 hours today, yet I never found any interesting article like yours.
It’s pretty worth enough for me. In my opinion, if all webmasters and
bloggers made good content as you did, the net will be much more useful than ever before.
Great weblog right here! Also your website a lot up very fast!
What host aree yoou thhe use of? Cann I get your aassociate link for your host?
I wish my site loaded up as quickly as yours lol
my blog post :: boat rental
Excellent way of telling, and nice post to take information on the topic of my presentation topic, which i am going to present in academy.
I read this piece of writing completely on the topic of the
difference of latest and preceding technologies, it’s awesome article.
Hi there would you mind letting me know which web host you’re working
with? I’ve loaded your blog in 3 completely different web browsers and I must
say this blog loads a lot quicker then most. Can you recommend a good internet hosting provider at a honest price?
Many thanks, I appreciate it!
I’m curious to find out what blog system you happen to be using?
I’m having some minor security issues with my latest
website and I’d like to find something more safeguarded. Do you have any
recommendations?
Thankfulness to my father who shared with me concerning this
website, this blog is actually amazing.
Howdy! This is my first comment here so I just wanted to give
a quick shout out and tell you I genuinely enjoy reading through
your articles. Can you recommend any other blogs/websites/forums that deal
with the same subjects? Thank you so much!
Do you have a spam problem on this website; I also am a blogger,
and I was wondering your situation; many of us have created
some nice methods and we are looking to exchange techniques with others, please shoot me an e-mail if interested.
Definitely believe that which you said. Your
favorite reason seemed to be on the internet the easiest thing to
be aware of. I say to you, I definitely get irked while people think about worries
that they plainly do not know about. You managed to hit the nail
upon the top and defined out the whole thing without having side-effects , people could take a
signal. Will likely be back to get more. Thanks
Конвертировать mp3 в flac бессмысленно.
Link exchange is nothing else however it is just placing the other person’s blog link on your page at proper
place and other person will also do same for you.
My spouse and I absolutely love your blog and find almost
all of your post’s to be exactly I’m looking for.
Does one offer guest writers to write content available for you?
I wouldn’t mind producing a post or elaborating on some of the subjects you write about here.
Again, awesome weblog!
Приложение преобразования звука для среды GNOME.
I love what you guys are up too. Such clever work and reporting!
Keep up the excellent works guys I’ve incorporated you guys to my blogroll.
At this moment I am going away to do my breakfast,
once having my breakfast coming again to read other news.
Feel free to visit my blog post :: 파워볼게임 (Forest)
My spouse and I stumbled over here by a different web address and thought
I may as well check things out. I like what I see so i am just following you.
Look forward to checking out your web page for a second time.
Thank you for the good writeup. It in fact was a amusement account it.
Look advanced to more added agreeable from you!
By the way, how can we communicate?
Здесь действует правило: чем больше, тем лучше.
Установите папку назначения и нажмите
скидка кнопку.
For latest news you have to pay a quick visit
the web and on internet I found this site as a best web page for hottest
updates.
Pretty part of content. I just stumbled upon your web
site and in accession capital to claim that I get
actually enjoyed account your weblog posts. Anyway I’ll be
subscribing in your augment or even I fulfillment
you access persistently quickly.
Great blog here! Also your web site loads up very fast!
What host are you the usage of? Can I get your affiliate hyperlink in your host?
I want my web site loaded up as fast as yours lol
Thank you, I’ve recently been looking for information approximately this
subject for a while and yours is the best I’ve found out so far.
However, what concerning the bottom line? Are you sure concerning the supply?
My partner and I stumbled over here coming from a different website and thought I might check things out.
I like what I see so i am just following you. Look forward
to going over your web page for a second time.