To reduce the taxable income, Help?

A married couple with income about 70K, have no dependents, hardly any adjustments and credits. What legitmate steps can be done to reduce the taxable income besides cash donations and/or IRA contributions? Would appreciate any suggestions. Thank you.

Public Comments

  1. Your answers are in the income tax booklet which accompanys the income tax form. It lists what can or cannot be deducted. Also , your library should carry Lasser's Income Tax Preparation Guide. Look up your information.
  2. People buy into partnerships in oil company and get only a percentage of the losses. They use the losses to offset income for many years. You need to get with a hi paid tax lawyer. It will be worth it in the long run. Don't let him sell you anything but what I described, or get independent recommendations. The catch with the oil company partnership losses is that they usually must be offset by only passive income, so it is only beneficial to taxpayers with interest and dividend income. So here's what you do. Put your money into interest bearing money markets of some type. You will earn dividend and interest. You file your return and the losses from the partnership offset all your dividend and interest income, so you get it basically, tax free. Unused losses are carried forward for 20 years after reported to IRS. There are more but that's the coolest one I've seen. The value of the partnership percentage depends on how much in dividends and income can be offset.
  3. Without making additional retirement contributions (IRA, 401k), it will be tough to reduce your taxable income this year. There is always the option of contributing to an FSA, having some of your benefits deducted on a pre-tax basis.
  4. If you file as Married Filing Jointly and your total income in 2007 is 70k, your federal income tax is $7093. It is about 10%. Cash donations may not reduce your tax. Donations are deductible only if you itemize deductions. You will itemize only if your deductions are more than your standard deduction (for joint return) of $10,700. If you put $4000 in IRA your tax will reduce by $600. If you put $8000 in IRA, your tax will reduce by $1200. Your highest tax bracket is 15%. So if you put $4000 in IRA, you get $3400 less to spend now.
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