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Have you ever wondered if there was such a thing as tax-free income?
You know you’re supposed to claim every dollar you make, but aren’t there ways to legitimately make tax-free money?
There are many, possibly more than you think.
Here are a few ways you can make tax-free income. If you wonder how any of these methods work or would like more ideas, please feel free to contact me.
- Roth IRA – You contribute funds after-tax, and your earnings grow tax-free. If you wait until retirement to withdraw the funds, you don’t pay taxes on the earnings.
- Social Security benefits – Some of your SSI might be tax-free. There are limits, of course, so not every dollar might be tax-free.
- Home sale gains exceptions – If you’re single, you can exempt up to $250,000 in capital gains, and if married, up to $500,000 when you sell your primary residence.
- Tax-free capital gains and dividends – If your income is low enough, you might qualify for tax-free capital gains.
- Capital gains offset by capital losses – If you time the sale of assets that earned capital gains with assets that had just as much of a loss, you can offset the taxes owed on the gains.
These are the most popular ways to earn tax-free income. Other ways that might not be as popular but that could provide tax-free income include:
- Section 1031 real estate exchanges
- Section 529 college savings plans
- Coverdell Education Savings accounts
- Stepped-up inherited assets
As always, please feel free to contact me with any questions or ideas to further your income and reduce your tax liabilities.