Here's one of my favorites. It's been part of our beloved tax code for over 30 years, yet many still don't take advantage of it.

What am I talking about?

The IRA -- Individual Retirement Account.

Now, before you say, "Oh, I know all about that one; what's so great about an IRA?", give me 10 minutes to explain 3 new benefits to IRA rules that you may not realize.

BENEFIT #1: How To Avoid Tax Rather Than Postpone Tax

First, did you know that there are now 2 kinds of IRA's available?

The so-called "Traditional IRA" is one that first came out way back in 1970's.

But there's a newer incarnation of IRA that's only a few years old -- it's called "Roth IRA".

What's difference between a Traditional IRA and a Roth IRA? There's a HUGE difference!

"Traditional" IRA contributions are tax-deductible, and growth of those contributions is also "tax-sheltered" while funds remain in account.

But eventually all tax-deductible "Traditional" IRA contributions, as well as growth of those contributions, will be subject to income tax when money is withdrawn from account.

In other words, Traditional IRA's offer opportunity to POSTPONE taxes. Traditional IRA's enable you to save taxes --- but these tax savings are only TEMPORARY!

This is big difference between Traditional IRA's and Roth IRA's: Traditional IRA's allow you to temporarily POSTPONE taxes. The Roth IRA offers 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.

But whatever you put in not only grows tax-free, but can also be withdrawn tax-free.

Here's an example to illustrate:

If you invest $2,000 per year for 20 years into a Roth IRA, 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.

Now comes fun part: Assuming IRA has existed for at least 5 years and you are at least 59 ½ years old, you can withdraw entire $126,005 TAX-FREE!

In contrast, if this money had been invested in a Traditional IRA, entire $126,005 would be subject to income tax as it is withdrawn.

The $86,005 of growth is magically converted from taxable income to non-taxable income. Assuming you are in 15% federal tax bracket, that's a savings of $12,901. Add any state income tax, and you could save well over $15,000 in taxes.

And $15,000 buys a lot of pizza in my house!