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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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. After I initially left a comment I seem to have clicked on the -Notify me when new comments are
    added- checkbox and from now on whenever a comment is added
    I receive 4 emails with the exact same comment.
    Perhaps there is a way you are able to remove me from that service?
    Appreciate it!

  2. Hosting Games 2018 Yılında Hosting Games İnternet Hizmetleri tarafından kurulmuştur.Kesintisiz ve kaliteli hizmetler vererek müşterilerinin arzularını yerine getirmeye çalışmaktayız,uzman kadromuz ve son teknoloji makinelerimiz ile en iyi hizmeti vermeye çalışmaktayız.Kendine ait alt yapı yatırımı sayesinde her zaman güncel donanımlara sahiptir…!! Website https://hostingames.com/

  3. you’re in reality a just right webmaster. The site loading speed is amazing.
    It seems that you’re doing any unique trick. Furthermore,
    The contents are masterwork. you have performed a wonderful
    task on this matter!

  5. Attractive section of content. I simply stumbled upon your
    blog and in accession capital to assert that I get in fact enjoyed account your blog posts.

    Anyway I will be subscribing on your feeds or even I achievement you access consistently quickly.

  7. Hosting Games 2018 Yılında Hosting Games İnternet Hizmetleri tarafından kurulmuştur.Kesintisiz ve kaliteli hizmetler vererek müşterilerinin arzularını yerine getirmeye çalışmaktayız,uzman kadromuz ve son teknoloji makinelerimiz ile en iyi hizmeti vermeye çalışmaktayız.Kendine ait alt yapı yatırımı sayesinde her zaman güncel donanımlara sahiptir…!! Website https://hostingames.com/

  9. Mу partner and I abѕolutely love ʏour blog and find
    most of your post’s to bbe exactly wgat I’m looking for.
    Does one offer guesst writers to write contеnt avɑilɑbⅼe forr you?
    I wouldn’t miknd publishing a pоst or elaborating on most of the
    subjects you write гegarding hеｒe. Again, aԝesome weЬlog!

  12. Asking questions are in fact fastidious thing
    if you are not understanding anything entirely, but this
    piece of writing presents pleasant understanding even.

  15. Hosting Games 2018 Yılında Hosting Games İnternet Hizmetleri tarafından kurulmuştur.Kesintisiz ve kaliteli hizmetler vererek müşterilerinin arzularını yerine getirmeye çalışmaktayız,uzman kadromuz ve son teknoloji makinelerimiz ile en iyi hizmeti vermeye çalışmaktayız.Kendine ait alt yapı yatırımı sayesinde her zaman güncel donanımlara sahiptir…!! Website https://hostingames.com/

  16. Pingback: iç giyim uw

  18. Hosting Games 2018 Yılında Hosting Games İnternet Hizmetleri tarafından kurulmuştur.Kesintisiz ve kaliteli hizmetler vererek müşterilerinin arzularını yerine getirmeye çalışmaktayız,uzman kadromuz ve son teknoloji makinelerimiz ile en iyi hizmeti vermeye çalışmaktayız.Kendine ait alt yapı yatırımı sayesinde her zaman güncel donanımlara sahiptir…!! Website https://hostingames.com/

  19. I’ve been exploring for a little bit for any high-quality articles or blog posts in this sort of area .
    Exploring in Yahoo I ultimately stumbled upon this website.
    Studying this info So i’m satisfied to express that I have an incredibly excellent uncanny feeling
    I discovered exactly what I needed. I so much without a doubt will make certain to do not omit
    this web site and provides it a look regularly.

  20. Does your blog have a contact page? I’m having
    trouble locating it but, I’d like to shoot you an e-mail.
    I’ve got some recommendations for your blog you might be interested in hearing.
    Either way, great site and I look forward to seeing it improve over time.

  21. What i don’t understood is if truth be told how you are now not really a lot more neatly-preferred than you might be now.
    You are very intelligent. You know thus considerably in the case of this subject, produced
    me for my part believe it from so many numerous
    angles. Its like men and women don’t seem to be interested until it’s one thing to do with
    Girl gaga! Your personal stuffs outstanding.
    All the time maintain it up!

  24. I’m not sure where you are getting your info, but good topic. I needs to spend some time learning much more or understanding more. Thanks for wonderful info I was looking for this information for my mission.

  26. I’m extremely inspired with your writing abilities and also
    with the structure in your weblog. Is this a paid theme or did you customize it yourself?

    Anyway stay up the nice high quality writing, it is rare to look a great blog
    like this one today..

  28. Thank you a lot for sharing this with all people you really recognize
    what you are speaking about! Bookmarked. Please additionally seek advice from my
    site =). We will have a hyperlink change agreement between us

  31. Server IP – Copy to Minecraft Client to Play: play.universemc.us

    UniverseMC is the most amazing cloud network you will ever
    find.
    We have mind-blowing amazing builds, A lot of friendly and supportive staff, an active community and an active forum!

    We currently offer the following gamemodes on our network:

    – Survival Classic Minecraft survival
    – Factions PvP survival, Explosions allowed
    – KitPvP Well designed RPG style KitPvP server
    – Earthgames Our custom PvP minigame, Known from youtube
    – Hungergames The well known deathmatch server type
    – Zombie Our custom zombie survival minigame
    – Creative Creative gamemode survival server

  33. I simply couldn’t leave your web site before suggesting
    that I really enjoyed the usual info a person provide for your guests?

    Is gonna be again steadily in order to check out new posts

  34. Its really a nice and helpful piece of information. Im glad that you shared this helpful info with us. Please keep us informed like this. Thanks for sharing.

  36. Hi, i read your blog occasionally and i own a
    similar one and i was just wondering if you get a lot of spam responses?
    If so how do you reduce it, any plugin or anything
    you can suggest? I get so much lately it’s driving me insane so any help is very much appreciated.

  39. Hi there would you mind letting me know which webhost
    you’re working with? I’ve loaded your blog in 3 completely different browsers and I must say
    this blog loads a lot faster then most. Can you recommend a good web hosting provider at a honest price?
    Thanks, I appreciate it!

  42. What i don’t understood is in reality how you are no longer really much more smartly-appreciated than you might be
    now. You’re very intelligent. You realize therefore significantly in the case of this topic,
    produced me personally believe it from numerous numerous angles.
    Its like men and women don’t seem to be interested except it’s one thing
    to do with Lady gaga! Your personal stuffs outstanding. At all times care for it up!

  44. It is appropriate time to make a few plans for the future and it’s time to be happy. I have read this publish and if I may I desire to suggest you some attention-grabbing things or advice. Maybe you can write subsequent articles regarding this article. I wish to learn even more things about it!

  46. I don’t know if it’s just me or if everybody
    else encountering issues with your site. It appears as though some of the text within your posts
    are running off the screen. Can somebody else
    please provide feedback and let me know if this is
    happening to them too? This could be a issue with my web
    browser because I’ve had this happen previously. Many thanks

Leave a Reply

Discover more from Small Business Paths

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

Continue reading