The IRS has notified earlier this year by our banks, credit institutions and financial institutions on all transactions that occurred during the previous tax year. Even if you go into a control collection, employment or a bank and cash a check firm, knows the IRS to learn. Here are several ways your financial institutions, the IRS information about their transactions with you (is the Almighty, 1099, series of forms, which says more U.S.Taxpayers)
1099-B share transactions
1099-MISC Miscellaneous income for rent and compensation of employees No
1099-INT – Interest
1099-DIV – Dividends Qualified
1099-R – Distributions from pension funds, rollovers, etc.
1099-S – Real Estate Transactions
1099-C – debt reduction
1099-A – Surrender
The IRS computer "already includes the taxpayer's current situation on January 31 of each year, because it is 1099s when due. UsuallyTaxpayers spend February 1 to April 15, documentation and reporting that the "computer IRS already knows. Taxpayers who need more time for an extension, which gives taxpayers until Oct. 15 to file. However, any amount due with the extension, which is expected by April 15 will be paid.
The IRS is our equipment as well as our fiscal agent. If a taxpayer, the IRS is about transactions, he is usually the "IRS computer" The computer can be captured and generate a letterStart a relationship with the taxpayer mailboxes. Their response to the communications of "computer IRS sends you to determine whether an IRS Human" is to participate.
Not a good thing when a "human IRS must give the painting, and usually means problems. Planning for taxes next year, preferably in June, July or August of the tax did. So, there are very few where appropriate, surprises during tax season.
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While you might assume any mutual fund investor should use Money’s mutual fund record-keeping tools, that isn’t the case. Because investment record keeping, including mutual fund record keeping, requires significant work and involves complexity, you need to make sure the effort is worth it.
In general, you keep investment records for any of the following reasons:
Reason 1: You want to track interest and dividend income.
Reason 2: You want to track realized and unrealized capital gains and losses.
Reason 3: You want to measure or grade the profitability of an investment by calculating its annual return or yield.
Obviously, all three of the tasks in the preceding list sound worthwhile, but many investors won’t need to use Money’s record-keeping tools to get this sort of information.
Tracking Investment Income
If your investing is done using tax-deferred accounts, such as individual retirement accounts, 401(k)s, and other similar investment containers, you don’t need to track the investment’s income. The income from tax-deferred investments stored is not currently taxable. The money you contribute to one of these tax-deferred accounts can be counted as a deduction when the money is transferred into the account. Any money you ultimately withdraw from one of these accounts can be counted as income when you move money out of the account and into your regular checking account.
For example, if you contribute money to an individual retirement account by writing a check on your regular bank account, you can categorize the check as “IRA contribution” when you write the check. This categorization lets you easily track the IRA contribution deduction you will need to report on your tax return. Similarly, if you withdraw money from an IRA account, all you need to do is categorize the deposit as IRA income. This lets you keep track of the IRA withdrawals you will also need to report on your tax return.
Tracking Capital Gains
As mentioned earlier, realized and unrealized capital gains are often the second reason for using Money for investment record keeping. In the case of a regular taxable investment account, any time you buy and then later sell an investment, you experience a capital gain or loss that needs to be reported on your tax return. Because capital gains and losses are important for your tax return, when you keep records of taxable investments you want to track these items. You even want to track potential, or unrealized, capital gains and losses.
However, while tracking unrealized and realized capital gains and losses is important for taxable investment accounts, you don’t need to do this for tax-deferred investment accounts like individual retirement accounts and 401(k) accounts. The reason is simple. For tax-deferred investment accounts, gains and losses aren’t taxable. Just as is the case with investment income, inside a tax-deferred investment account, gains and losses have no effect on taxable income. Again, the only tax effect comes from money you move into and out of the account. In general, money you move into the account is a deduction for purposes of calculating your taxable income. Money you move out of your account is an income amount for purposes of calculating your income tax return.
The general rule described in the preceding paragraph–that money moved into and out of a tax-deferred investment account is what produces a tax deduction or taxable income amount–is true. However, predictably, some tax-deferred investment accounts don’t work this way.
There are, for example, nondeductible IRA accounts. A nondeductible IRA account doesn’t give the taxpayer a deduction merely for moving money into the account. Also, a Roth IRA account doesn’t actually produce any taxable income just because you move money out of the account. The primary benefit of a Roth IRA is that you get to withdraw money from the IRA without including the withdrawal on your tax return.
However, in spite of the fact that money moved into certain types of IRAs or out of certain types of IRAs doesn’t trigger a tax deduction or taxable income, the general rules described here still apply. Even for nondeductible IRAs or Roth IRAs, you don’t need to track investment income, dividend income, capital gains, and capital losses for tax record-keeping using Money.
Measuring Investment Performance
As identified earlier, the third reason for investment record keeping concerns investment performance measurement. In general, one of the things you want to do when you become serious about your investing is calculate how good or how bad an investment performs. Complete and accurate investment records force you to honestly evaluate your investing.
One of the ways you measure investment performance is by calculating the annual return, or yield, produced by the investment. For example, if you buy a stock for $12 a share and later sell it for $18 a share, you should calculate the annual return on the stock.
An annual return, or yield, resembles an interest rate. By comparing the return a stock earns to the return provided by other investments, you gain a frame of reference and get a better idea of whether a particular investment makes sense.
While calculating returns obviously makes sense, note that one of the tasks your mutual funds management company does is calculate annual returns. Therefore, you don’t need to duplicate this effort. In effect, one of the services you are already paying the mutual funds management company for is the calculation of this important performance measure.
Mutual fund management companies calculate returns on an annual basis–typically using the calendar year as the period for which returns are calculated. Your investment holding period may not match the period for which the return was calculated. For example, if you hold an investment for one year but your year runs from July 1 to June 30, a return measure provided by the mutual fund company may not be useful if the return is from January 1 to December 31. Nevertheless, if you use the prudent mutual fund investment strategy–which is simply to invest for longer periods, to buy and then hold–the mutual fund management company’s performance measurements do give you the information you need.
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Jun 10
8
Mutual Fund NAV’s
Net asset value (NAV) represents a fund’s per share market value. This is the price at which investors buy (”bid price”) fund shares from a fund company and sell them (”redemption price”) to a fund company. It is derived by dividing the total value of all the cash and securities in a fund’s portfolio, less any liabilities, by the number of shares outstanding. An NAV computation is undertaken once at the end of each trading day based on the closing market prices of the portfolio’s securities.
For example, if a fund has assets of INR 50 million and liabilities of INR 10 million, it would have a NAV of INR 40 million. The NAV is the important in terms of share trading this number is important to investors, because it is from NAV that the price per unit of a fund is calculated. By dividing the NAV of a fund by the number of outstanding units, you are left with the price per unit. If the fund has 4 million shares outstanding, the price-per-share value would be INR 40 million divided by 4 million, which equals INR 10. Because mutual funds distribute virtually all their income and realized capital gains to fund shareholders, a mutual fund’s NAV is relatively unimportant in gauging a fund’s performance, which is best judged by its total return.
NAVs are helpful in keeping an eye on your mutual fund’s price movement, but NAVs are not the best way to keep track of performance. The reason for this is mutual fund distributions. Mutual funds are forced by law to distribute at least 90% of its’ realized capital gains and dividend income each year. When a fund pays out this distribution, the NAV drops by the amount paid. This is important because an investor may become frightened when they see their fund’s NAV drop by INR 3 even though they haven’t lost any money (the INR 3 was paid out to the shareholder).
The most important thing to keep in mind is that Mutual Fund NAVs change daily and are not a good indicator on how your portfolio is doing because things like distributions mess with the NAV (it also makes mutual funds hard to track)
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VCs, Angels, BDCs, what are they? How are they different? How can an ordinary investor get involved? Do they offer an opportunity for high yield dividend payouts during retirement? These are all questions that anyone planning for retirement should know the answers to in order to have the opportunity to include one of the least understood, and highest dividend paying, categories into their portfolio as part of a diversified plan for retirement.
Venture Capitalists (VCs), Angels (accredited investors), and Business Development Companies (BDCs) essentially fulfill the same role: to help small and medium sized companies obtain financing when more traditional means of funding (bank loans) are unavailable. Bank financing almost always requires a certain amount of guarantees such as accounts receivable, inventory, buildings or equipment or other assets that can be held as collateral for a loan or line of credit. Smaller companies, start-ups, or even individuals with an idea for a business, or medium sized companies that don’t have sufficient funds to grow their business often don’t have the capital required, nor do they have the requisite assets or accounts receivable required by traditional banks to meet their strict loan requirements. This is where Angels, VCs, and BDCs come in. Angels are regulated by the SEC and must be “accredited investors” with a net worth of at least $1,000,000 in order to get involved with a private placement of stock which means that they provide funds for a smaller company and in return own a percentage of the business. VCs are generally partnerships of accredited investors that provide the same type of funding. In addition, they often offer other “incubator” type services to help their portfolio companies to prosper, frequently including the placement of their own management personnel on the board of directors or on the management team. In the case of both Angels and private VC firms these activities are, by regulation, the realm of wealthy investors and beyond the reach of most individuals.
As part of a broad base attempt to level the playing field and give smaller investors an opportunity to become involved in growing smaller businesses, congress passed The Investment Company Act of 1940 which, among other things, created a new class of business called Business Development Companies. While similar to VCs in function, unlike VCs, Shares of BDCs are traded on the major exchanges, and anyone can own them. Similar to Real Estate Investment Trusts, BDCs do not pay income tax on their profits as long as they pass along at least 90% of their profits to their shareholders who then pay tax at their individual tax rates. Since they are required to pay out nearly all of their profits to stock holders, BDCs often fund their growth by issuing additional shares. When this occurs, a stockholder, or potential stock holder, must determine whether or not dilution, caused by the sale of the new shares, will be more than made up by the new business that the incoming money will fund. Generally a BDC will announce, at least in broad terms, how the proceeds from the new offering of stock will be used. Additionally, it is important to evaluate how successful the company has been in the past, how leveraged they are, and how management has reacted to changing market conditions. In other words, like any other investment, doing the proper due diligence, and knowing and understanding the company prior to investing is critical in making the right investment choices.
Because of the pass through tax structure as well as the inherent risk in this type of venture, BDCs typically pay significantly higher dividends than the average company. For that reason it makes good sense to consider them as a part of a diversified retirement portfolio. If you are building up a nest egg for retirement, dollar cost averaging into quality BDCs is an excellent way of creating a high yield position as part of your overall mix. If you are in retirement already, quality BDCs can provide an excellent income stream that will continue to payout regardless of market fluctuations.
A word of caution, BDCs should not be bought and forgotten, like most investments, past performance is no guarantee of future results. By the very nature of the business, BDCs frequently change their portfolio of businesses, may change their risk tolerance levels, may change their leverage, may be impacted by changes in interest rates, etc. Fortunately all of this type of information is readily available in annual and quarterly reports, and BDCs are required to publish any material changes in their business. With the proper due diligence, and appropriate vigilance, BDCs make sense for anyone interested in boosting their retirement income through higher dividends. They are especially valuable in IRAs and other tax free venues where the higher yields can compound free of taxation.
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I’ll never forget the first annuity I wrote as a young agent working for my father. My client, a teacher, signed up to contribute well over $900 a month into his 403(b) account.
I really didn’t know at that point that most of the teachers were contributing a lot less into their annuities. In my green mind this was something that I would be doing many times over in the upcoming years. However, it was the largest monthly contribution I would ever write!
As I drove from Oklahoma City to my dad’s Tulsa office with that first sale in-hand (which I had mailed in earlier), and a few other small ones, I couldn’t wait to see the proud look on my father’s face.
The conference room of the high-rise office was filled with about 30 agents that day. I had no idea my father employed this many agents! It suddenly dawned on me how he could afford such a luxury office! As he finally walked into the room to start the meeting, I wondered if he even knew I was there.
After the usual sales rah-rah, dad congratulated one of the agents for writing over $10,000 in annualized premium the previous week. I thought “Hey, I wrote over $14,000 – and it was my first week!”.
Even though I never got recognition for being the sales champ of our office in my first week of annuity business, I never did forget my first client, and his wise choice to max out his contributions.
What would motivate a person to do that? Well, my client was just a few years from retirement age. Though he had previously contributed to the 403(b) plan, he was now maxing it out for future benefits. A concept that so many Americans have yet to figure out. With his teacher’s pension, and his annuity income, this fellow could live well for the rest of his life! Even though he had worked most of his life in a profession that most would agree pays too little. I would be safe to say that come retirement time, my first client was better off than many others who had earned a LOT more income.
So what is an annuity, and what is an indexed annuity? And, more importantly, how can you benefit?
An annuity is actually the opposite of life insurance. In a life policy, you are insuring against the possibility of dying too young. With an annuity, you are buying insurance against living too long, and running out of income. An annuity can guarantee you a check for the rest of your life!
Many will say to keep your investments apart from your insurance, and for the most part I would agree with that. However, an annuity is an exception to the rule in my book. Now with indexed annuities, this vehicle can actually be a very wise investment choice.
An index annuity is just what the name implies. It is indexed to something. Normally the stock market. In other words it is tied to an index like the S&P 500. If the index goes up, you get higher earnings. If the market tanks, the annuity (at least the good ones) goes back to a guaranteed interest vehicle! So if the market is doing really well, so is your annuity. If the market is not so hot, your annuity will still be growing (normally at a rate better than most CDs are paying at that time).
There are some disadvantages to an annuity, but not if you use it as it was intended. You don’t want to put money into an annuity that you might need next week, or next year for that matter (unless you are looking for an immediate annuity with a large cash deposit to start). BUT, if you have other investments and cash that you can get your hands on, an annuity can be your ace in the hole in case everything else tanks.
Most annuities are backed by your state’s insurance guarantee fund. So, even if the company goes out of business, you should be able to get your money. Check to see what is available in your state. If they don’t have a guarantee fund. Take a trip and buy yours in a state that does!
There are even some off shore annuities that really shine, but investing in those is more complex than buying one here in the states.
I no longer write annuities, as I have moved on to trade and invest for a living. But, I have never forgotten the lesson I learned from my first annuity client!
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Jun 10
4
Top 3 Income Investing Plays
Many people hold off on investing in anything because they feel like they need more current income, and they don’t want to have to wait years for an investment to pay off.
What is the solution if you are in that category? Income Investing. What exactly is income investing? You may have heard the term and wondered. After all, isn’t it the goal of any investor on any investment to turn a profit? Yes, it is. However, an income investor is looking for recurring income right now, and growth in the future too.
After the 2008-2009 housing bubble and market meltdown, many analysts were raving about the benefits of dividend paying stocks. Stocks that pay dividends are only one type of income investment. If your stock is providing you income (in the form of dividend payments), and the value of the stock is rising, you really have the best of both worlds. Long term capital gains and current income too!
This is exactly the type of thing investors are looking for when they invest in real estate. Property that is cash flowing now, and property value that is rising. Some tend to think you can only find that in real estate. However, there are a few safe ways to do that in the market too, without becoming a landlord!
We mentioned dividend paying stocks. My favorite play for current income is by investing in Master Limited Partnerships(MLPs). You can buy MLPs inside of your stock account with your favorite online discount broker. Although you buy them like a stock, they behave much differently. The main thing you should want to know is that they can provide Rock Solid income for you now, and future growth as well. In fact, many MLP values grew during the melt down, and increased the income payments too!
There are also a few Exchange Traded Funds that pay dividends. If I had to list the options mentioned here in order I would rate them as:
1) MLPs
2) ETFs that pay dividends
3) Dividend paying stocks
I’ve always felt that income paying investments are a better play than those that only provide future profit. After the horrible meltdown, many analysts suddenly agree!
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Many Network Marketers wonder why they should ever focus on SEO as a lead generation technique.
Especially, when they can just throw an ad up on Google or an ezine and instantly get traffic to their site (SEO takes time before you see any traffic).
I have no objections to using paid advertising and have heard 100’s of success stories from people effectively using it to generate tons of leads.
On the other hand, one downfall to using paid advertising methods such as Google AdSense and ezines, is that once you stop paying for the advertising, your traffic stops.
If you can learn the art of SEO, it will pay you dividends long after the fact.
You do the work once and bear the fruits of your labors (in the form of more leads and sales) for years to come.
Isn’t that what network marketers are all about anyway?…
Enhance Your Credibility with SEO
Whenever I type in a keyword to a search engine and access a web page from the SE listing, I can’t help but assume the site is an authority and credible. Especially, if the site has lots of content contained within it.
Search engine spiders have hundreds of ways of measuring the quality and value of a websites’ content. They continuously get better at recognizing which sites people are gaining value from, and which ones are causing people to hit the back button on their browser.
If you can get your content to rank high on the search engines, it enhances your credibility one hundred fold. People are automatically going to assume you’re a credible expert on that subject just by the very fact that you’re online and ranking high.
Not only that, you can feel good knowing that if you’re ranking high people are responding positively to your content.
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Is there secret unclaimed money in Montana? Perhaps everybody is metaphorically thankful that the economy is in a bad shape now; if not, millions of unclaimed money and properties would not be discovered.
The fuzz about these dormant assets has recently proliferated all over the news. Whether it’s online or broadcast and print, the states are calling out for possible owners of unclaimed cash in their records. In the United States of America, at least 400 billion dollars were found kept by the government.
Texas and Missouri also holds two of the most blinding amount of dormant assets. Texas holds at least 2 million, which consists of unreturned cash and unclaimed properties. And Missouri announced about 500 million dollars worth of assets.
Official state comptrollers have released legitimate statements of confirmation. Conferences have been aired, official websites launched, and signed ads were posted to inform of the public of their forgotten riches.
And as the list lengthens, the state of Montana has also announced their records of unclaimed properties. On the latest estimation, their records hold about 21 million dollars worth of cash, checks, payrolls, tax refunds, certificates and etc. No wonder it is dubbed as the “Treasure State” because there is a real treasure in Montana.
Montana’s Pot of Gold
Montana’s unclaimed assets consists of money, uncashed checks, drafts, state warrants, uncashed payroll checks, utility deposits, interest dividends or income, savings and checking accounts, safe deposit box contents, credit balances, customer overpayments, gift certificates, unidentified remittances, stocks, bonds and uncashed coupons. All of these have exceeded dormancy stage in their respective agencies and were returned to the state government for safety keeping.
Oftentimes, the dormancy range lasts for about 1-5 years depending on the agency. Afterwards, it is turned over to the state government for proper return or safe keeping. However, and this is a very common incident in America, people always tend to neglect forwarding their new postal addresses as they relocate from one state to another.
Nevertheless, the states’ governments are willing to return the unclaimed money. The State of Montana has opened their records for anyone interested to know if they have left behind millions and billions of assets just sitting and waiting to be discovered.
But the search is not easy for Montanans because the state doesn’t maintain any online search capabilities in their website. They link their site to various third party sites, mostly database search engines, which also relies on them for new updates. As new assets come to life and turned over everyday, the officials forget to notify and update these records. You have to make multiple searches to uncover your money.
On the bright side, there are database search engines that maintain regular updates of Montana’s undisclosed riches. Cash Unclaimed is one of the most prominent tools used not only by Montanans but also the whole of America in finding lost properties. Just enter your name, or your deceased relative’s name, or business name and you’ll be presented with the amount of money and where it was found.
If you have by any chance lived or made business in Montana, you might have left behind a treasure chest you forgot to dig up. Start your search now.
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Bond funds make bond investing easy for average investors. Investing in bonds profitably could soon be a different story. The hazards of bond investing follow in no uncertain terms, in plain simple English.
The attraction of bond investing is that bonds pay the investor higher interest income than other investments. These securities represent long term debt to the issuer, which is usually a corporation or government entity. Example: XYZ issues bonds priced at $1000 each which pay $60 a year in interest and mature in 20 years. At maturity whoever owns that bond security gets the $1000 back and the security no longer exists. Throughout its 20-year life, the bond trades in the secondary market and its price fluctuates. Any investor who owns it can sell at will at the market price; and an investor in search of income can buy it in the bond market. Note this: the $60 a year in interest income is FIXED for the life of the bond and never changes. This gives you a 6% yield.
Now you know bond investing basics. Few average investors actually invest in individual bond issues like XYZ above. Instead, millions of Americans get into bond investing the easy way with bond funds. These funds pool investor money and manage a collection (portfolio) of these securities for their investors. When you invest money in a bond fund your money buys shares, and you then own a small part of a large portfolio of bonds. The fund actually owns the securities and buys and sells bonds on an ongoing basis. They pass the interest income on to investors in the form of dividends, and usually charge less than 1% a year for their services.
As a bond fund investor you can have your interest income send to you periodically or you can have these dividends reinvested automatically to buy more fund shares. The value or price of your shares will fluctuate along with the price fluctuations in the individual bonds held in the portfolio. You can buy or sell fund shares on any business day. You’re not locked in. Now you know bond fund investing basics. So, here’s the rest of the story. Remember, when you own bond funds you have an investment in bond securities. Whatever happens in the bond market and to the value of the bonds in your fund portfolio translates to gains and losses for you.
Let’s say you own shares in the most popular type of bond fund, an intermediate-term fund of high credit quality. The average bond security in the portfolio matures in a little less than 10 years. The fund is paying a dividend yield of 6%, and you’re happy with it vs. the 2% interest you might get from your bank. What could go wrong? Interest rates could go up. A couple of years from now new bond issues could be paying $90 a year in interest income for a $1000 bond, which translates to 9%. What do you think will happen to the price (value) of a 6% bond when investors can get 50% more interest income in new bond issues (9% vs. 6%)? The price will fall substantially for all existing bonds, including those in your bond fund.
Let’s put it this way: If you pay $667 for a bond that pays $60 a year in interest income you earn a current yield of 9%, because 9% of $667 equals $60. If 9% is the new going rate, any interested investor can either buy a new issue to get it or pay a reduced price (get a discount) for an existing issue in the bond market. Remember, bond prices fluctuate as these securities trade in the market.
Don’t dwell on the math if it confuses you, and please note that the above example suggesting that a 6% bond originally issued for $1000 paying $60 a year could fall to a value of $667 if rates for new similar bonds increase to 9%. It’s an oversimplification to emphasize this concept: the most important thing you must know about bond investing these days is that bond investors will lose big when interest rates go up significantly. When interest rates go up bonds and the bond funds that invest in them lose money, and so does the investor.
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Up to 85% of your Social Security retirement benefits may be taxable. Here’s how to find out how much is taxable and what you can do to reduce or eliminate any tax.
Of all the financial issues surrounding being a senior, the one that tops the list in terms of anger is the fact that, depending on the situation, Social Security retirement benefits are taxable. My experience indicates that some seniors are completely unaware of this fact. I have also had to sit and listen to the ranting of those who are aware. It goes something like this: “I already paid tax on the earnings during my working years. The Social Security withdrawn from my income each pay check was a tax. This sounds like a tax on a tax.” And on and on…
After letting the person blow off some steam, my response typically was, “Hey, don’t shoot the messenger! I’m here to see if any of your Social Security benefits are taxed, if so, how much and what we can do to reduce or eliminate that tax.” So let me take you through the first part of our conversation.
Whether or not you are taxed depends on:
1. The amount of your income.
2. Whether or not you have income from sources other than Social Security.
The amount of your tax depends on:
1. Your marital filing status: single or married.
2. The amount of your income.
The tax on Social Security retirement benefits was put into effect in 1983. Tax was applied on up to 50% of benefits. In 1993 this was increased to 85%. Here’s how the calculation goes…
The first step is to calculate your “provisional income“. So grab last year’s tax return.
1. Subtract your taxable S.S. benefits (line 20b) from your Adjust Gross Income (line 37).
2. Add one half of your total S.S. benefits (line 20a).
3. Add any tax exempt interest (line 8b).
4. The result is your “provisional income“.
Once you know this number, you can apply the rules to determine how much of your S.S. is taxed. Again, this depends on whether you are married or single and the amount of your income.
Let’s look first at a married couple filing jointly. Here is the math…
1. If your provisional income is below $32,000, you don’t have a problem.
2. For provisional income over $32,000:
a. Take the provisional income between $32,000 and $44,000 and divide it by two.
b. If your provisional income is above $44,000, take the total provisional income, subtract $44,000 and multiply by 0.85.
c. Add 2a and 2b.
d. Multiply your total S.S. benefits (line 20a) by 0.85.
e. The lesser of your result on 2c and 2e above is the amount of your S.S. benefit taxed.
Now let’s look at the calculation for a single person…
1. If your provisional income is below $25,000, none of your S.S. benefits are taxable.
2. For provisional incomes over $25,000:
a. Take the provisional income between $34,000 and $25,000 and divide it by two.
b. If your provisional income is above $34,000, subtract $34,000 from your total provisional income and multiply by 0.85.
c. Add 2a and 2b.
d. Multiply your total S.S. benefit (line 20) by 0.85.
e. The lesser of your result on 2c and 2d above is the amount of your S.S. benefit taxed.
Now that you know whether or not any of your Social Security benefits are taxable, and if so, how much, the next step is to take a look at the ways you can reduce or eliminate this tax. In general, there are three solution categories:
1. Reduce your interest income. The most common is interest on CDs.
2. Reduce your dividend income.
3. Reduce your tax exempt interest income.
Note: The calculations above use a very simplified approach. Your situation may have other factors that would affect the math. It is strongly advised that you consult with a qualified tax professional.
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