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But there’s a newer version of the IRA that’s only a few years old.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IRA contributions, as well as the growth of those contributions, will be subject to income tax when the money is withdrawn from the account.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Whatever you put in not only grows tax-free, but can also be withdrawn tax-free.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”

  2. Hello there! This is my first visit to your blog!
    We are a collection of volunteers and starting a new initiative in a community in the
    same niche. Your blog provided us useful information to work
    on. You have done a extraordinary job!

  3. You could definitely see your enthusiasm in the article you write.

    The world hopes for even more passionate writers like you who aren’t
    afraid to mention how they believe. All the time go after your heart.

  4. Hello! I know this is kind of off-topic however I needed to
    ask. Does operating a well-established blog like yours
    take a large amount of work? I’m brand new to blogging however I do write in my journal on a daily basis.
    I’d like to start a blog so I will be able to share my personal experience and thoughts online.
    Please let me know if you have any ideas or tips for brand new aspiring blog owners.
    Thankyou!

  6. You’ve made some really good points there.
    I checked on the web for more information about the issue and found most
    people will go along with your views on this web site.

  7. Thank you for sharing excellent informations. Your website is so cool. I’m impressed by the details that you¡¦ve on this blog. It reveals how nicely you perceive this subject. Bookmarked this web page, will come back for extra articles. You, my pal, ROCK! I found just the info I already searched all over the place and simply couldn’t come across. What a perfect web-site.

  12. 코드JUNO#아이폰xs #그래프게임#바카라#한국야동#사다리#지뢰찾기#비비스#리얼#메이저놀이터#먹튀없는붐붐리턴즈#먹튀셀렉트#먹튀검증사이트#씨앤에스#온라인카지노#c&s#먹튀select#온라인바카라#동양야동#붐붐리턴즈#붐붐마인즈2탄#조조벳#봄비벳#온카지노#jn-agc.com#무료야동#인증업체#주노야#junoya.com#텀블러#AV정보#노래방#스포츠중계#성인사이트

  14. Hi all, here every one is sharing these familiarity, therefore
    it’s pleasant to read this website, and I used to visit this blog everyday.

  16. If you’re still on the fence: grab your favorite earphones, head down to a Best Buy and ask to plug them into a Zune then an iPod and see which one sounds better to you, and which interface makes you smile more. Then you’ll know which is right for you.

  17. Greate post. Keep posting such kind of information on your
    page. Im really impressed by your site.
    Hello there, You have performed an incredible job.
    I’ll definitely digg it and in my opinion recommend to my friends.
    I’m confident they’ll be benefited from this web site.

  18. Hey! This is my first comment here so I just wanted to give a quick
    shout out and tell you I genuinely enjoy reading your posts.
    Can you suggest any other blogs/websites/forums that deal
    with the same topics? Thanks a lot!

  19. I want to show my gratitude for your kind-heartedness giving support to people who really need help with that topic. Your very own commitment to passing the message all over has been amazingly invaluable and has continually enabled those like me to realize their pursuits. The useful help and advice can mean a whole lot a person like me and far more to my colleagues. With thanks; from all of us.

  22. It’s actually very difficult in this busy life to listen news on Television,
    therefore I just use web for that reason, and take the hottest news.

  30. I’m not sure why but this website is loading very slow for me.

    Is anyone else having this issue or is it a issue on my end?
    I’ll check back later on and see if the problem still exists.

  32. Ever see will need to have an e-mail page.
    Websites ranging in proportion and sophistication from a local restaurant
    with a Fortune 500 company, have contact pages. Inside my current startup Possess seen a variety of requests…
    in the pizza delivery guy letting us know he was at the cab end door to potential investors looking to speak with the management team.

    When you’re setting encourage contact page (and finding the traffic volume of a local restaurant)
    you do not want to think about how to take care of your contact requests when site traffic increases.
    And you should.

    Take into consideration setting up automation that alerts support, sales or another stakeholders with your company when a message request comes
    through. You could make a dropdown field in a form for kinds of contact requests.
    You possibly can build logic in many marketing automation platforms that
    sends email alerts to the right resource as part of
    your startup depending on what type of request the viewer selects.

    I was buried with contact requests when we launched beta.
    Becoming a cloud-based product I saw many product support requests.

    And then we mapped form submissions on our contact page to develop support tickets in Zendesk.

    You also want to arrange redundancies so contact requests
    (important ones!) don’t get lost in one particular recipient’s inbox.
    You can alert multiple recipients, create reminder emails, or trigger automatic replies to contact requests with information that could solve their problem.
    This is very easy to setup with all-in-one marketing platforms like HubSpot.

  39. En Güzel, Kaliteli ve Yeni Özel Hatay Escort Bayan Sayfası olan bu Site
    içerisinden Kendinize en Yakın Hatay Escort Bayan ile görüşme yapabilirsiniz

  40. I’m really enjoying the design and layout of your website.
    It’s a very easy on the eyes which makes it much more
    enjoyable for me to come here and visit more often. Did you hire out
    a designer to create your theme? Great work!

  43. Undeniably believe that which you said. Your favorite justification seemed to be on the net the easiest thing to be aware of.
    I say to you, I definitely get annoyed while people consider worries that they just don’t 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 likely be back to get more. Thanks

  45. The Zune concentrates on being a Portable Media Player. Not a web browser. Not a game machine. Maybe in the future it’ll do even better in those areas, but for now it’s a fantastic way to organize and listen to your music and videos, and is without peer in that regard. The iPod’s strengths are its web browsing and apps. If those sound more compelling, perhaps it is your best choice.

  46. Having read this I thought it was extremely enlightening.
    I appreciate you finding the time and effort to put this information together.
    I once again find myself personally spending way
    too much time both reading and posting comments.
    But so what, it was still worth it!

  48. hello!,I like your writing very so much! share we keep up a correspondence more approximately your article on AOL? I need an expert in this area to resolve my problem. Maybe that’s you! Taking a look ahead to look you.

  49. The very root of your writing while sounding reasonable initially, did not really sit properly with me personally after some time. Someplace within the sentences you were able to make me a believer but only for a short while. I still have got a problem with your jumps in assumptions and you might do nicely to fill in those gaps. In the event that you can accomplish that, I will certainly be impressed.

Leave a Reply

Discover more from Small Business Paths

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

Continue reading