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Looking for advice on additional alternatives my husband and I might look into, to keep the tax man at bay.

We currently have approx. $175K AGI

We are already:

maxing out on both 401Ks: $10.5 x 2 = $21K - (will the limit increase in 2001?)

utilizing employer reimbursement accounts for daycare and healthcare to the tune of approx. $4K/yr

This brings our taxable income down to $150K.

We do not own a home - we are looking at buying - but even so, our itemized deductions are limited at current income levels-so it may not help that much since currently our rent is slightly below market.

We deduct state income taxes and charitable deductions - but the difference between the standard deduction and the limited itemized deduction is shrinking.

We plan to pay toward our daughter's college education with funds from investments, as I do not see any tax advantaged educational programs available to us.

Is it time to look into tax free money markets, bonds or mutual funds (?) How do they work?

Invariably when I've approached others for advice, I've gotten the canned response: "Oh my God, don't you realize you're in the top 5% of all households in America! You should fall on your knees and kiss the ground and thank God you're an American! – you don't have a tax problem! ".

I'd like to be spared from that line of thinking:
(1) Both my husband and I were both raised in poverty
(2) We only began earning these salaries a short while ago, after years of sacrifice and horrific school loans
(3) We live in an area of the country where an average home sells for $275K
(4) This country owes my husband a partial living: he's a disable veteran who fought for all Americans.

I don't mean to sound like I have a chip on my shoulder - I would just like advice - not judgement.
Thanks (maybe I got this way after getting bashed on the LBYM board for being one of the “ whining, uncaring wealthy” ;)

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