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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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. Great work! This is the type of info that are meant to be shared around the internet.

    Shame on the search engines for not positioning this put up higher!
    Come on over and seek advice from my website .
    Thanks =)

  7. Heya i am for the primary time here. I found this board and
    I to find It really helpful & it helped me out much.
    I hope to provide something again and help others like you aided me.

  8. Eskişehir nakliyat hizmeti bu şehirdeki insanlar tarafından oldukça önem verilen hizmetlerin başında gelmektedir. Eskişehir halkı anı dolu eşyalarının taşınma sırasında zarar görmesini asla istemezler. Bu nedenle Eskişehir nakliyat firması tercih ederken ince eleyip sık dokuma yoluna giderler. Ancak nakliyat firması tercih etmek için iyi bir araştırma yapmak gerekir. Buda zor sürecin başındaki en meşakkatli iştir aslında. Bizler müşterileri meşakkatli süreçten kurtarmak adına en iyi Eskişehir nakliyat firmalarını çatımız altında toplayarak yaşanan sorunlara son verdik. Eskişehir evden eve nakliyat talebinde bulunan tüm müşterilere birçok firmanın fiyat teklifini anlık olarak ileterek en uygunu tercih etmelerini sağladık. Eskişehir nakliyat alanında yaptığımız bu uygulama tamamen çağımızın gereklerine uyum sağlamaktadır. Taşınan kişilerden aldığımız teşekkürlerde bunun en büyük kanıtı durumundadır.

  9. Manisa nakliyat son zamanların en gelişmiş hizmetleri arasında yerini aldı. Bu duruma katkıda bulunanlarsa Manisa nakliyat firmalarının ta kendisidir. Büyük şehirlerle yarış halinde olan Manisa’nın gelişimi endüstriyel yükselişi olağan üstü seviyeye gelmiştir. Tüm bunlar hızla meydana gelirken Manisa evden eve nakliyat sektörünün bu durumdan aşağı kalması tabi ki beklenemez. Gerek açık pazar yük taşımacılığı olsun gerekse de evden eve nakliyat sektörü olsun Manisa nakliyat hizmetinin sağlanması için görev yapan nakliyat firmalarına oldukça fazla ihtiyaç duyarlar. Tamda burada biz devreye girerek Manisa da bulunan en başarılı kuruluşları bir çatı altında toplayarak gerek evden eve nakliye müşterilerin gerekse de nakliyeye ihtiyaç duyan firmaların taleplerine çözümler üretmekteyiz.

  10. Hello! I know this is kind of off-topic however I had to ask.
    Does running a well-established blog like yours require a
    large amount of work? I am completely new to running a blog however I do write in my journal everyday.
    I’d like to start a blog so I will be able to share my personal experience and views online.
    Please let me know if you have any suggestions or
    tips for new aspiring bloggers. Appreciate it!

  12. Hi there, I do think your web site could possibly be having browser compatibility problems.
    Whenever I look at your site in Safari, it looks fine however, when opening in Internet Explorer,
    it’s got some overlapping issues. I merely
    wanted to give you a quick heads up! Aside from that, great site!

  13. It is perfect 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 desire to suggest you few interesting things
    or suggestions. Maybe you could write next articles referring
    to this article. I desire to read even more things about it!

  14. Hey! I know this is kinda off topic nevertheless I’d figured I’d
    ask. Would you be interested in trading links or maybe guest authoring a blog post or vice-versa?
    My site discusses a lot of the same subjects as yours and I
    think we could greatly benefit from each other.
    If you happen to be interested feel free to send me an email.
    I look forward to hearing from you! Awesome
    blog by the way!

  16. Howdy excellent website! Does running a blog similar to this take a massive amount work?
    I have no knowledge of computer programming
    however I had been hoping to start my own blog soon. Anyhow, if
    you have any recommendations or tips for new blog owners please share.
    I know this is off subject however I just wanted to ask.
    Many thanks!

  18. *I simply wanted to thank you a lot more for your amazing website you have developed here. It can be full of useful tips for those who are actually interested in this specific subject, primarily this very post. Your all so sweet in addition to thoughtful of others and reading the blog posts is a great delight in my opinion. And thats a generous present! Dan and I usually have enjoyment making use of your recommendations in what we need to do in the near future. Our checklist is a distance long and tips will certainly be put to excellent use.

  23. you are really a just right webmaster. The website loading speed is incredible.
    It seems that you’re doing any distinctive trick. In addition, The contents are masterpiece.
    you’ve done a magnificent process on this topic!

  25. I don’t even know how I ended up here, but I thought this post was great.
    I don’t know who you are but certainly you are going to a famous blogger if you
    aren’t already 😉 Cheers!

  27. Wonderful beat ! I would like to apprentice while you amend your website, how could i subscribe for a blog website?
    The account aided me a acceptable deal. I had been tiny bit
    acquainted of this your broadcast offered bright clear idea

  31. *It’s a good shame you don’t contain a give money button! I’d definitely give money for this fantastic webpage! That i suppose for the time being i’ll be satisfied bookmarking together with including an individual’s Feed that will my best Msn balance. That i appearance forward that will recent messages and definitely will share the web site utilizing my best Facebook or twitter team: )

  35. *I must say, as a lot as I enjoyed reading what you had to say, I couldnt help but lose interest after a while. Its as if you had a wonderful grasp on the subject matter, but you forgot to include your readers. Perhaps you should think about this from far more than one angle. Or maybe you shouldnt generalise so considerably. Its better if you think about what others may have to say instead of just going for a gut reaction to the subject. Think about adjusting your own believed process and giving others who may read this the benefit of the doubt.

  36. *The new Zune browser is surprisingly good, but not as good as the iPod’s. It works well, but isn’t as fast as Safari, and has a clunkier interface. If you occasionally plan on using the web browser that’s not an issue, but if you’re planning to browse the web alot from your PMP then the iPod’s larger screen and better browser may be important.

  39. Hey! Do you use Twitter? I’d like tto follow youu if that
    would be ok. I’m undoubtdly enjoying your blog and look forward to new updates.

  40. Hello! Quick question that’s entirely off topic. Do you
    know hoow to make your site mobile friendly? My
    blog looks weirdd when viewing frkm my iphone4. I’m trying to find a thdme or plugin that might be able
    to coorrect this issue. If you have any recommendations, please share.
    Manny thanks!

  43. Hi there, this weekend is fastidious in support of me, because this moment i am reading this fantastic educational paragraph
    here at my house.

  44. Hello just wanted to give you a quick heads up.

    The words in your content 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 design look great though! Hope you get the problem fixed soon.
    Cheers I will immediately snatch your rss feed
    as I can not find your e-mail subscription hyperlink or newsletter service.
    Do you have any? Kindly allow me know in order that I may just subscribe.

    Thanks. I am sure this post has touched all the
    internet users, its really really fastidious article on building up new blog.
    http://foxnews.org

  45. I have been browsing online more than 3 hours lately,
    yet I never found any interesting article like yours. It’s lovely value sufficient for me.

    In my view, if all site owners and bloggers made excellent content as you probably did, the web will probably be much more
    helpful than ever before.

  46. NEW DELHI: Prime Minister Narendra Modi on Monday hit back at
    Congress president Rahul Gandhi saying that even the rishi and muni (Hindu sages) did not have complete knowledge of
    Hinduism. Addressing a rally in Rajasthan’s Jodhpur, PM Modi said that the voters will have
    to decide

  48. dfg
    Excellent article. Keep posting such kind of info on your page.
    Im really impressed by it.
    Hello there, You have done a great job. I will certainly digg it and in my opinion recommend to my friends.
    I am sure they’ll be benefited from this web site.

Leave a Reply

Discover more from Small Business Paths

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

Continue reading