NO one likes paying taxes - the ones earning in billions hate it the most. For retirees, taxes quite seem like nightmare. Since you’re looking for ways to generate some tax-free income during retirement, here are three ways to get started.
While Roth IRA has a number of benefits, the one that many savers find enticing is the provision to collect tax-free income in retirement. Though Roth IRAs provide no tax break for contributions, during earnings and withdrawals, you won’t owe the IRS a dime.
While there are annual income limits in Roth IRAs, if you earn more, there is a way you could get around these restrictions. You would simply need to fund a traditional IRA and then convert it to a Roth. Likewise, if you got a 401(k) plan through your employer, you can convert it into Roth as well. Though you’d need to pay taxes on the contributions you move into a Roth, such a step would provide you ample flexibility in retirement.
Municipal bonds are different from Corporate bonds. In municipal bonds, the income from interest you get is always exempt at the federal level. Further, if you purchase bonds issued by the state government where you live, you won’t need to pay for state and local taxes as well.
The IRS wants its share of every income you receive, and rental income is not an exception. However, there is a deviation. In case you rent out your home, or a portion of your home for 14 days or less in a year, the entire income you earn will be tax-free.
In order to qualify for this, you’ll need to limit the rental period to 14 days or less in a calendar month. Also, you need to use the home yourself for more than 14 days, or more than 10% of the total number of days you rent it out. The good thing is, you don’t need to rent out for 14 consecutive days. Hence, you can rent out for meetings, parties, get togethers, and other daily purposes, and can easily avoid taxes as long as you stay within the limit.