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1. |
Avoid
Capital Gains on Sales of Real Property |
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You
can exclude up to $250,000 (or $500,000 per married couple) of gain
on the sale of your principal residence. This exclusion may be used
once every two years.
In
addition, you must have claimed the property as your principal residence
for at least two of the last five years that you owned it.
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2. |
Deduct
Home Mortgage Interest |
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If
you've been holding off on buying property, stop renting or leasing
your principal residence. Buy a home, and then you can deduct the
interest portion of your mortgage payments from your federal income
tax.
Mortgage
rates are currently are at or near record lows, and several mortgage
companies are quoting incredible rates. If you've been contemplating
the plunge, 2002 may be the year to act.
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3. |
Consolidate
Your Debt and Save |
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If
you have any outstanding debts, you may want to use any home equity
to consolidate those debts using a home equity loan. Lenders usually
provide interest rates than other debtors (credit cards, auto loans,
etc.) , and the government allows a deduction for interest paid
on all home equity "indebtedness" loans.
This
deduction is usually allowed on home equity loans up to $100,000.
Check with your tax advisor for more
information.
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4. |
Save
on Taxes Through Education |
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A
whole slew of tax breaks are designed to encourage higher education.
For instance, Coverdell Accounts (formerly known as the Education
IRA) allow you to save money on a tax-advantaged basis for the purpose
of higher education.
The
Hope tax credit provides dollar-for-dollar reductions in taxes for
taxpayers, spouses, or dependents attending qualified educational
institutions. The Hope tax credit gives up to $1,500 of credit for
each of the first two years of college.
Instead
of the Hope tax credit, taxpayers can opt to use the Lifetime Learning
tax credit. Students wanting to acquire or improve their job skills
can have up to 20% of expenses incurred at qualified institutions
refunded in the form of a tax credit.
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5. |
Maximize
Your Gifting Through Dynasty Vehicles |
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Transferring
assets to grandchildren or even great-grandchildren directly can
incur the dreaded Generation-Skipping Transfer Tax.
Instead
of gifting directly to your heirs, consider gifting to a "generation-skipping
dynasty trust." A generation-skipping dynasty trust, established
on behalf of your loved ones, can avoid estate and gift taxes for
up to three generations.
To
learn more about Dynasty Trusts, click
here.
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Capital Gains |
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Mortgage and Equity |
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Education Tax Breaks |
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Gifting Options |
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Sheltering Rental Income |
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Using Your Unified Credit |
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Social Security |
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Tax-Free Munis |
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Estate Tax Reductions |
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Life Insurance |
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IRAs and 401k Plans |
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And much more |
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