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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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. Dan situs yang telah berlisensi resmi juga mempunyai kemungkinan kemenangan tinggi sehingga bisa menguntungkan bossku, bukan malah menguntungkan web tersebut seperti web abal-abal.

    Di saat anda mencari situs dipencarian google pasti bakal menghadirkan puluhan sampai ratusan website judi daring yang belum kita tahu asal-usulnya.
    Sebab betapa baiknya agan melihat review-analisa nya terlebih dahulu, atau dapat referensi dari teman bossku mengenai sebuah website yang anda
    percayai bagaimana recordnya apakah memiliki
    catatan buruk atau tidak.

  3. I know this if off topic but I’m looking into starting my own blog
    and was wondering 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% positive.
    Any suggestions or advice would be greatly appreciated.
    Appreciate it

  4. I’m very happy to discover this website. I wanted to thank you for your time for this fantastic read!!
    I definitely loved every part of it and i alszo have you saved too
    fav to check out nnew things on youur site.

    My webpage … dolar kaç tl

  5. Have you ever considered publishing an e-book or guest authoring on other websites?
    I have a blog centered on the same ideas you discuss and would really like to have you share some stories/information. I
    know my viewers would enjoy your work. If you are even remotely interested, feel free to send me an e mail.

  6. Hello would you mind sharing which blog platform you’re working with?
    I’m looking to start my own blog in the near future but I’m having a tough time making a decision between BlogEngine/Wordpress/B2evolution and Drupal.
    The reason I ask is because your design and style seems different then most blogs and I’m looking for something unique.

    P.S My apologies for being off-topic but I
    had to ask! http://www.offersbay.in/user/profile/288226

  8. I’m curious to find out what blog platform you have been utilizing?
    I’m having some small security problems
    with my latest site and I would like to find something more secure.
    Do you have any recommendations?

  11. Undeniably imagine that which you stated. Your favorite reason seemed to be
    at the web the easiest thing to take into account of. I say to you, I certainly get irked even as other folks consider concerns that they just do not recognise about.
    You managed to hit the nail upon the top as well as defined out the whole thing without having side effect , other folks can take a signal.
    Will probably be again to get more. Thank you

  20. Hello my family member! I wish to say that this post is
    amazing, nice written and come with approximately
    all vital infos. I’d like to peer more posts like this .

  21. Pingback: typing spee test

  23. I love your blog.. very nice colors & theme. Did
    you design this website yourself or did you hire someone to do it for you?
    Plz respond as I’m looking to design my own blog and would like
    to know where u got this from. many thanks

  26. What’s up it’s me, I am also visiting this web page on a regular basis, this web page is
    really fastidious and the viewers are really sharing good thoughts.

  28. I absolutely love your blog and find many of your post’s to be exactly what I’m looking for.
    Would you offer guest writers to write content to suit your needs?
    I wouldn’t mind writing a post or elaborating on many of the subjects you write related to here.
    Again, awesome weblog!

  29. No matter if some one searches for his necessary thing, so he/she wishes to be available that in detail, so that
    thing is maintained over here.

  33. Oh my goodness! Amazing article dude! Thanks, However
    I am encountering problems with your RSS. I don’t understand the reason why I am unable to subscribe to it.
    Is there anybody else having similar RSS problems?
    Anyone who knows the solution can you kindly respond? Thanx!!

  34. Pingback: Timing Your Carbohydrate Intake For Weight-Loss – Earth Ocean and Air Travel

  35. Hi there Dear, are you in fact visiting this website regularly, if so after that you will absolutely obtain good knowledge.

  36. Just desire to say your article is as amazing. The clarity on your submit is just excellent and i
    can assume you are an expert in this subject.
    Fine along with your permission allow me to take hold of your feed to
    stay updated with coming near near post. Thank you 1,000,000 and please keep up
    the enjoyable work.

  37. Pingback: Buy This Domain

  39. Heya i am for the first time here. I found this board and I
    to find It really helpful & it helped me out a lot. I’m hoping to offer one thing again and help others such as you helped me.

  40. Hello I am so delighted I found your website, I really found you
    by error, while I was searching on Digg for
    something else, Regardless I am here now and would just
    like to say cheers for a remarkable post and a all round interesting blog (I also love the theme/design), I don’t have time to browse it
    all at the moment but I have saved it and also added in your RSS
    feeds, so when I have time I will be back to read a great deal
    more, Please do keep up the fantastic jo.

  41. Pingback: Hennessy XO

  42. Hi there, this weekend is pleasant in favor of me, since this occasion i am reading this
    fantastic educational paragraph here at my residence.

  43. Pingback: friendly farms cartridges

  44. Your style is very unique compared to other folks I have read stuff from.
    Thank you for posting when you’ve got the opportunity, Guess I will just bookmark this site.

  45. Pingback: raw garden cartridge price

  46. My spouse and I absolutely love your blog and find almost all oof your post’s to be just what I’m looking for.
    Does one offer guest writers to write content for you? I wouldn’t mind creating a post or elaborating on some of the subjects you write with regards to here.
    Again, awesome blog!

    Also visit my blog post – Politika Son Dakika

  48. Pingback: refillable juul pods for sale

  49. Unquestionably believe that that you stated.
    Your favorite reason seemed to be at the web the simppest factor to bbe mindful
    of. I say to you, I definitely get annoyed even as other folks think about issues that
    they plainly don’t realize about. You managed to
    hit the nail ulon thhe highest as well as outlined out the entire thing with
    no need side eftfect , other people can take a
    signal. Will ptobably be again too get more.

    Thank you

    Have a look at my web site :: Görüntülü Sohbet

  50. When I originally commented I clicked the “Notify me when new comments are added”
    checkbox and now each time a comment is added I get three e-mails with the same comment.
    Is there any way you can remove people from that service?
    Bless you!

Leave a Reply

Discover more from Small Business Paths

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

Continue reading