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Ask the Right Questions
  • How much do you need to save for your child's education?
  • What will be the cost of your child's education in five years? In 10 years?
Quick Report
Education Funding Plans
    Save money for education:
  • Custodial accounts
  • Coverdell education savings accounts
  • 529 plans
Money Management Tip: The Rule of 72
    The Rule of 72 is a way of determining approximately how long it will take for your money to double at a given rate of return.
  • Money earning a 3% annual rate of return will double in 24 years (72 divided by 3% = 24)
  • Money earning a 6% annual rate of return will double in 12 years (72 divided by 6% = 12)
Deductions, Credits & Strategies

Many tax advisors will suggest that you may be able to reduce your taxes by itemizing your deductions, rather than taking standard deductions. For example, your joint income might be $65,000 in 2008, but by itemizing your mortgage interest, property taxes and charitable contributions you reduce your taxable income below the $65,100 mark, which would lower your marginal federal tax bracket from 25% to 15%.

Take Advantage of Tax Deductions and Credits

Always take advantage of any deductions and tax credits that may be available to you. Deductions will reduce your taxable income. This, in turn, reduces the amount of taxes you pay depending on your tax bracket. Tax credits are taken after your taxable income is computed, and represent a dollar-for-dollar reduction of taxes you pay.

For more information on these tax savings ideas, please consult your personal tax preparer.

Tax-Advantaged Investment Strategies

Another way to save money on your taxes, is to invest using tax-advantaged strategies.

Consider municipal bonds. They are issued by a state, state agency or authority, or a political subdivision (county, city, town). Interest earned is exempt from federal income taxes, and from state income taxes within the state of issue.

Also, Individual Retirement Accounts (IRAs) grow tax deferred and may provide an initial tax break through deductible contributions. The traditional IRA is the most familiar type, but a Roth IRA (where distributions may be tax-free, if certain conditions are met) may provide an attractive option for you if your income exceeds the limits for deducting your contributions to a traditional IRA. Income taxes are payable upon withdrawal. A 10% federal tax penalty may apply to withdrawals taken before age 59½.