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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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!
Voters will be in a position to make their opinion known on a quantity of gaming
initiatives in November 2020.
Digital photography is a good imdb movie that will no longer needs you to generate a large purchase.
You just need a great digicam and a tripod that may
begin.
Thanks for one’s marvelous posting! I seriously enjoyed reading it, you can be a great author.I will be sure to bookmark your blog
and will often come back later in life. I want to encourage
continue your great job, have a nice morning!
Hi, I do believe this is a great web site. I stumbledipon it 😉 I will revisit yet again since I book-marked it.
Money and freedom is the greatest way to change, may you
be rich and continue to help other people.
I couldn’t refrain from commenting. Exceptionally well written!
Good information. Lucky me I came across your site by
chance (stumbleupon). I’ve book marked it for later!
I do not even know the way I finished up here, however I believed this submit used to be good.
I do not understand who you might be however definitely you are
going to a famous blogger if you aren’t already. Cheers!
I believe this is one of the most important info for me. And i’m happy studying your article.
However want to commentary on few general issues, The web site style is great,
the articles is actually nice : D. Excellent job,
cheers
Hi, this weekend is pleasant in favor of me, since this moment i am reading
this wonderful informative post here at my residence.
each time i used to read smaller articles that as well clear
their motive, and that is also happening with this piece of writing which I am reading at this time.
Also visit my web site :: autozone south main salinas
Pretty section of content. I just stumbled upon your weblog and in accession capital to assert that
I get actually enjoyed account your blog posts. Anyway I’ll be subscribing to your
augment and even I achievement you access consistently
fast.
Hi to every body, it’s my first pay a quick visit of this weblog; this webpage consists of remarkable and in fact fine
data in support of visitors.
You can certainly see your enthusiasm within the article you write.
The sector hopes for more passionate writers like you who aren’t afraid
to say how they believe. Always go after your heart.
I visited several blogs except the audio quality for audio
songs existing at this web page is truly marvelous.
Hi! I’ve been following your web site for a while now and finally got
the bravery to go ahead and give you a shout out from Dallas Texas!
Just wanted to mention keep up the fantastic work!
Why users still make use of to read news papers when in this technological globe all is
existing on net?
Excellent goods from you, man. I have understaznd your stuff previous to and you are jus extremely great.
I actually like what you have acquired here, really like what
you’re saying and the way in which youu say it.
You make it entertaining and youu still care forr to keep it wise.
I can not wait to read much mokre from you.
This iis actually a tremendous website.
Link exchange is nothing else but it is just placing the other person’s webpage
link on your page at suitable place and other person will also
do same in support of you.
Whoa! This blog looks exactly like my old one!
It’s on a entirely different topic but it has pretty much the same
layout and design. Excellent choice of colors!
Definitely believe that which you stated. Your favorite reason seemed to be
on the internet the easiest thing to be aware of.
I say to you, I certainly get irked while people consider worries that they just do not know about.
You managed to hit the nail upon the top as well as defined out the whole
thing without having side effect , people could take a signal.
Will probably be back to get more. Thanks
I have been surfing online more than 4 hours today, yet I never found any interesting article like yours.
It is pretty worth enough for me. In my opinion, if all site owners and bloggers made good
content as you did, the internet will be much more useful than ever before.
Excellent blog! Do you have any tips for aspiring writers?
I’m hoping to start my own website soon but I’m a little lost on everything.
Would you recommend starting with a free platform like WordPress or
go for a paid option? There are so many choices out there that I’m totally confused ..
Any tips? Kudos!
Thank you for the good writeup. It in reality used to
be a entertainment account it. Glance complex to more delivered agreeable from you!
However, how can we be in contact?
What’s up to every body, it’s my first visit of this web site; this blog consists of remarkable and genuinely fine information for visitors.
all the time i used to read smaller content that as well clear theiir motive, and that is also happning
witth this piece of writing which I am reading at this place.
I know this if off topic but I’m looking into starting
my own weblog and was curious what all is required to get set up?
I’m assuming having a blog like yours would cost a
pretty penny? I’m not very web smart so I’m not 100% certain. Any tips or
advice would be greatly appreciated. Many thanks
When someone writes an post he/she keeps the thought of
a user in his/her mind that how a user can be aware of it. So that’s why this
piece of writing is perfect. Thanks!
Good response in return of this question wih solid arguments and describing all concerning that.