<p>That makes sense - thanks :)</p>
<p>We converted some, but in our situation it was a no-brainer, because we have almost no income. In fact, I needed some taxable income so that I could benefit from an energy tax credit after we replaced our air conditioners and furnaces in 2010. So, back in 2010 we converted one of my wife’s IRAs in the current tax year (2010) and I converted some of mine and split the taxes between 2011 and 2012. Remember, that was a one-time thing they let us do following the financial meltdown. I will probably do a small conversion in 2013 depending on how much income I can have without paying significant income taxes. I am the 47 percent!</p>
<p>NJres, you freeloader. ;)</p>
<p>^^Seriously. What a freeloader!</p>
<p>But…how do you do it? I sure would like some hints, because I can’t manage to shelter a dang thing from the IRS, and would love to.</p>
<p>What are you talking about busdriver11?</p>
<p>Are you joking?</p>
<p>You get …capital gains treatment on your investment properties. You write off the interest and points. You get depreciation on the properties. You can write off improvements to the properties. Your interest rates are subsidized by the government. Property taxes are deductible. </p>
<p>On your house, you can write off your mortgage interest and property taxes. Your first 500,000 in capital gains when you sell your house is tax free</p>
<p>Income and capital gains from your Roth are tax free. If you have capital gains and dividends in taxable accounts , they are taxed at much lower rates.</p>
<p>If you get health care from your company, you get a tax break. </p>
<p>If you own any munis the interest is likely to be tax free.</p>
<p>The company you work for gets tax breaks. You might have higher pay and higher benefits because of these tax breaks. The company would have lower after tax income and maybe lower dividend payouts without tax breaks.</p>
<p>Your company would have fewer customers without tax breaks because your employer’s customers also receive tax breaks and would have less cash flow without them. Less cash flow from customers means less money to spend on companies like yours.</p>
<p>Your company also has dealings with the government both directly and indirectly and if the government cuts back your company is going to achieve fewer revenues.</p>
<p>There was a cover article in Time Magazine a couple of weeks ago that discussed the fact that most Americans get tax breaks or subsidies from the
government whether they realize it or not.</p>
<p>This thread is about shifting money to tax free accounts. This thread is about sheltering income. :)</p>
<p>Well, yes, dstark I was joking…kind of. I have my taxes (last years, might I add), looming over my head and I actually find very few ways to shelter any income because most of our income comes from an employer. I wish our income was via cap gains.</p>
<p>I get jack for tax shelter on my investment properties, because it is income limited. The only thing any of those deductions help is to lower the tax on positive cash flow. Most everything else is limited by the AMT. Not planning on selling our house, but if we did, God knows if it would be at a gain. Maybe in ten years.</p>
<p>The Roth seems like a great tax shelter, but because we converted, we have to come up with plenty of cash both this year and the next. It sure doesn’t help me now.</p>
<p>It is useful that my company gets plenty of tax breaks…but they also pay a ton of taxes and employ a huge number of people and provide a useful service. I think they give back. plenty They even provide health insurance to part timers, which is rare.</p>
<p>Sure, these are all ways that taxes benefit me and my company, but in reality, when I am sitting down doing my taxes, they seem all theoretical. The only thing that seems to lower my tax bill somewhat is property taxes, mortgage interest, and charitable deductions…and when I hear about people paying no income tax, I want to know the secret!</p>
<p>Here is a real winner.</p>
<p>I do not convert IRA to Ross IRA because I rolled over all my balances to a self directed 401K account. While there are restrictions on company 401K and financial institute IRA accounts on the use of fund and “borrowing”. There is no restrictions on borrowing and investments from a self directed 401K account. You can borrow any amount and payback in 5 years in installment. You have to use the fund for investments, but you have additional options to invest in real estate or collectibles(ie, gold, silver, coins or stamps).</p>
<p>^^That sounds like a fantastic deal for a real estate or collectible investor. Do you have to be self employed to do that?</p>
<p>" The only thing that seems to lower my tax bill somewhat is property taxes, mortgage interest, and charitable deductions…and when I hear about people paying no income tax, I want to know the secret!"</p>
<p>The secret is don’t have any income. Quit your job. Have your husband quit his job. Get rid of your investments.</p>
<p>Either that…or own a large investment and borrow against it. You don’t have to pay taxes on loans. It better be a really large investment because you do have to pay the loans back.</p>
<p>By the way, if you pay the AMT you are not getting the complete benefit
of the Bush-
Obama tax cuts. </p>
<p>If you are very wealthy, and make your income in capital gains, you don’t have to worry about the AMT.</p>
<p>“It is useful that my company gets plenty of tax breaks…but they also pay a ton of taxes and employ a huge number of people and provide a useful service. I think they give back. plenty They even provide health
insurance to part timers, which is rare.”</p>
<p>That is what everybody says. I deserve my tax cuts. My company deserves its tax cuts. We all pay enough taxes. Well…maybe not the
other guy. That disabled person that makes 6,000 a year. That elderly person that makes 12,000 a year. They should pay income taxes. Damn freeloaders.</p>
<p>The Roth is a huge tax shelter. Sorry. It is huge. You will notice the benefits some day. 
You gave up one tax break for another. You think the Roth is a better
tax shelter. :)</p>
<p>It is true that labor is taxed much higher than capital so you don’t get as much tax benefits as those that make their money using capital. Society
says somebody else’s $100,000 of income generated by capital is worth more than your $100,000 of income. (I am just using $100,000) as an example.</p>
<p>These reasons may apply. Maybe, not.</p>
<p>[Borrowing</a> From Your 401(k)](<a href=“http://www.lendingtree.com/smartborrower/7-for-7/money-management/borrowing-from-your-401k/]Borrowing”>http://www.lendingtree.com/smartborrower/7-for-7/money-management/borrowing-from-your-401k/)</p>
<p>Well, good enough reason to redo the tax system. Shed many of the breaks, simplify things, get rid of the tax time headaches. Cap gains income shouldn’t be taxed at a far lower break than income anyways. That elderly person who makes 12K a year could be a very wealthy person who is handy with tax shelters, which is far different than the person who is trying to live off that income. When it comes to taxes, it’s better to know the entire picture. Sure, we could quit our jobs, declare bankruptcy and into foreclosure, but that seems an unpleasant way to avoid paying taxes.</p>
<p>I always wondered if the encouragement for people to convert to Roth’s had to do with the govt wanting that tax money right now, instead of waiting till later. Then, of course, they can spend it right away.</p>
<p>“That elderly person who makes 12K a year could be a very wealthy person who is handy with tax shelters, which is far different than the person who is trying to live off that income”</p>
<p>Yeah…there are so many of those wealthy elderly living on 12,000 a year. How many do you think there are?</p>
<p>"and when I hear about people paying no income tax, I want to know the secret! "</p>
<p>The secret is to make a lot less money that you make.</p>
<p>Regarding the Self Directed 401K account.
Yes, with the name in “401K” you need a corporation to set it up, thus in CA you need to pay $800 corporate tax at the minimum. I am not sure if you need to be self-employeed, however, the company has to be operational and no more than one or two employees. SEP IRA rules govern the contribution amount. Also, there is a setup fee and an annual maintenance cost associated with the account, although it is not too expensive. The financial institution which your account is opened may require additional annual fees. So, with the privilege, there is a cost.</p>
<p>And yes, borrowing from the account has some drawbacks, however, there are two benefits on a self directed 401K account:</p>
<ol>
<li>You will never be unemployeed, it is your own company. So the money is there for you to borrow.</li>
<li>You set your own interest rate. It can be as low as you wanted.</li>
<li>Yes, payback is after tax money, so is all money you borrowed from anywhere else.</li>
</ol>
<p>here is one of the web sites that explains everything</p>
<p>mysolo401k.net</p>
<p>“Yeah…there are so many of those wealthy elderly living on 12,000 a year. How many do you think there are?”</p>
<p>Don’t know. I don’t think the age is relevant, the shelters in our tax code generally do not distinguish as far as your age. I’m not a big fan of selective tax shelters in any case, as most people don’t have the ability to access the majority of them. Politicians determining the tax code is crazy.</p>
<p>Thanks for the information, artlover, I’ll take a look at that site. It seems like the perfect setup for certain situations.</p>
<p>You don’t know, but you are against what they are doing?</p>
<p>Ok…</p>
<p>I would like to simplify the tax code too. </p>
<p>I don’t see it happening.</p>
<p>How could I know? Even if that data exists, I’m too lazy to search for it because I don’t really care. I do not begrudge people for optimizing their legal tax breaks. I merely would like the tax code simplified and many breaks, even ones that affect me, removed. I don’t see it happening either.</p>
<p>You brought it up like it is some kind of issue.</p>
<p>Maybe those elderly that make 12,000 a year are really wealthy but they have all these tax breaks. </p>
<p>You brought that up. </p>
<p>The deductions you take, that Americans take, like the mortgage deduction, are some of the biggest drains on the federal budget.</p>
<p>I am not basing this on a feeling or a guess. 
You are getting tax breaks. </p>
<p>I can guess though.
Health care tax benefits alone are probably worth 5,000 after tax dollars to you and your family. The government gave you $5,000.</p>
<p>Mortgage deduction…I am guessing…another $7,000 gift? That is a guess.
Property tax…a couple of thousand…AMT might affect that negatively. Might not get much of a deduction there.</p>
<p>The Roth…that is going to be a savings of thouands a year…every year…once it gets going…</p>
<p>Your tax breaks are worth more than $12,000 a year. </p>
<p>My tax breaks are worth more than $12,000 a year too.</p>
<p>That is more than that wealthy elderly person who only makes $ 12,000 a year.</p>
<p>I hope I never have to live on $12,000 a year. I would be in such trouble. And if I do get in such trouble, I hope I don’t have to pay an income tax. :)</p>
<p>Man, dstark, you are feisty today, looking for an argument. I don’t have the finger dexterity with this iPhone to take you on, and I don’t disagree with what you said. My main point was that I wish I could figure out more tax breaks (and actually, your numbers are way off), though I think overall we’d be better off as a country if they fixed the tax code. I’m not picking on Grandma living off of 12k a year (actually my Grandma lives on a bit more than that).</p>
<p>Yeah. I am feisty today. Sorry.</p>
<p>Good luck with getting more tax breaks.</p>