Monthly Newsletter

September 2008

NEW TAX-FREE CAPITAL GAINS AND DIVIDENDS

Starting in 2008, capital gains and qualified dividends are tax free to people in the 10% and 15% tax brackets--which cover taxable income up to $65,150. on a joint return and $32,550. on a single return. Total income can be larger when taking personal exemptions and standard or itemized deductions into account.

Alternative: If your income is too high for you to qualify to take such income tax free, consider making gifts of capital gains and dividend-paying assets to lower-bracket family members who do qualify.

Roth IRA and Roth 401(k) earnings
Contributions to these retirement savings accounts aren't deductible, but all investment returns earned in them and distributions from them can qualify to be totally tax free.

Long-term planning: There is a real risk that tax reates will increase in coming years due to large looming budget shortfalls and surging costs of Medicare and Social Security.

If tax rates do rise, tax-free income from Roth IRAs and Roth 401 (k)s will become even more valuable compared with retirement income taxed at ordinary rates when received from traditional IRAs and other kinds of retirement plans.

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