When it comes to most forms of income, chances are you will need to pay at least some taxes on it. Oftentimes these taxes are either removed from your paycheck automatically or you send a check to the IRS. While taxes are something we all have to contend with, not all forms of income are taxable. There are a variety of ways to generate income that is legally tax free. Using tax free income strategies can help boost your savings and reduce your tax bill at the end of the year. Here are three forms of tax free income that you should consider.

Contribute To A Roth IRA

Saving for retirement is something that should be on the forefront of your mind. A Roth IRA is a great way to both save for retirement and earn tax free income. After age 59 and 1/2, you can make tax-free withdrawals on your Roth IRA account. The main downside is that while you are contributing to your Roth IRA, the contributions are not tax-deductible. However, for future tax free retirement income, setting up a Roth IRA is a great option. 

Invest In Municipal Bonds

Municipal bonds are something else that you should consider adding as a part of your tax free income strategy. Municipal bonds are issued by local governments in order to pay for expenses or certain types of infrastructure projects. Basically, these bonds help local governments raise the capital they need for certain projects. Municipal bonds then pay out interest for a set number of years. After the designated amount of interest payments have been made, your original investment is then returned to you. Many municipal bonds are tax-exempt, which means you will not have to pay federal taxes on the income from the interest. Some bonds are even exempt from state and local income taxes as well.

Selling Your Home

Another form of tax free income that you may not know about is the profit from selling your home. However, there are some limitations to this tax free income. You must own the home and live in it for at least two of the five years before the sale. Up to $250,000 of the profit is tax-exempt for single homeowners and up to $500,000 is tax-exempt for married couples who file jointly. Any excess is subject to capital gains taxes. 

While taxes are something that most of us have to pay on our income, there are a few forms of income that are tax-exempt. A few forms of tax free income that you should consider include income produced by Roth IRAs, income from investing in municipal bonds, and the profit generated from selling your home. Reach out to a place like Alternative Strategies Insurance Solutions for more tips on tax free income strategies. 

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