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DH's salary is increasing. We need more protection from taxes as we inch into the higher bracket.


I'm not being flip here. You do realize, don't you, that a dollar deducted still costs you 65 cents if you're in the top bracket? If you consider that a good deal, such a deal I have for you, with apologies to JAFO (I think) who originated it.

Loan me $100,000. I'll sign a note. I'll default. Sue me to establish judgment. (I didn't collect taxes for 25 years for nothing--try to collect.) Voila! You have a $100,000 deduction for bad debt. Meanwhile I'll happily pay the income tax on the $100,000 of forgiven debt. No need to thank me--I'm just a nice guy.

Like everyone else I suppose you're looking for tax breaks that don't cost you anything. Sorry, but they don't (legally) exists. You want to pay less tax? Have children and buy a house. You'll be in the hole in terms of net bucks in your pocket, but the children will bring you joy in your declining years, and you have to live somewhere, so why not let Uncle Sugar share the burden?

Unfortunately you have little option regarding retirement savings. Since your husband isn't covered by a retirement plan, each of you can contribute the maximum ($3,000 if you're under 50 for 2004; $4000 for 2005) to a traditional IRA and deduct it.

Beyond that you can take advantage of the special tax rates for long-term capital gains and qualified dividends. No tax will be due on your gains until you sell, and the dividends are taxed at a reduced rate in the interim.

I understand that everyone thinks she pays too much tax, but I strongly urge you to put tax considerations at the bottom of the list when you're planning your financial future. Once you have clear goals and a plan to get there, minimizing taxes will be a lot easier, when there are options available.

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