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Lower Rates Means Less Taxes:  By 2006, each of the tax brackets (above the 15% bracket) will drop by 3%, and the top bracket will drop by 4.6% (from 39.6% to 35%).  These reduced rates will save you thousands of dollars in taxes each year.

Increased Limits For Your Retirement Accounts:  Amounts contributed to your retirement accounts generally reduce your taxable income and grow tax deferred.  In 2002, the maximum annual salary deferral into your 401(k) or 403(b) account will be $11,000, and then will increase by $1,000 each year until reaching $15,000 in 2006.  The annual limits on SEPs, SIMPLES, and Keoghs have increased as well, so feel free to contact us with any questions if you're self-employed.

Additional Tax-Free College Savings Opportunities:  "529 Plans" now provide for tax-free growth, as long as money withdrawn from the account is used to pay for the child's college expenses.  In addition, starting in 2002, the maximum contribution to a child's education IRA will increase from $500 per year to $2,000 per year, and money can be contributed to both an education IRA and a 529 plan on behalf of the same child during the same year.

More People Will Be Able to Deduct Student Loan Interest:  Starting in 2002, the maximum you can earn and still qualify to deduct student loan interest will increase from $55,000 to $65,000 for single individuals and from $75,000 to $130,000 for married couples.


Have you been hit by the Stealth Tax?  If you're high income taxpayer, the answer is probably "yes".

The government was very sneaky when they enacted this tax.  If your adjusted gross income exceeds a certain threshold, you begin to lose out on the tax savings associated with your itemized deductions and personal exemptions.

  • Itemized Deductions: If you're a high-income taxpayer, you most likely itemize your deductions. If your income exceeds $132,950 (in 2001), you're required to "phase out" your itemized deductions by 3% of the excess. For example, if your adjusted gross income is $232,950, you'd be required to reduce your itemized deductions by $3,000 [($232,950 - $132,950) * 3%].

  • Personal Exemptions: For 2001, you're entitled to claim a personal exemption of $2,900 for yourself, your spouse, and each of your dependents. If you're single and your income exceeds $132,950, or if you're married and your income exceeds $199,450, you'll need to phase out the personal exemptions you're allowed to claim.

Relief is On The Way

The limitation on itemized deductions and the phase-out of the personal exemptions for higher-income taxpayers will be gradually repealed beginning in 2006, and will be fully repealed in 2010.


Looking to pay down your debts or build up a nest egg?  One approach is to keep your fingers crossed and hope that you win the lottery or inherit a lot of money from a long lost relative.  A more sensible approach is to follow the lead of others who have successfully achieved their financial goals and put together a systematic plan that will help you attain your savings and debt reduction goals.

The Debt Trap

Getting into debt is easy.  Whether its student loans or credit cards, you're in the minority these days if you're completely out of debt.

What's challenging is paying off your debts.  Did you know that if you owe $5,000 on a credit card that charges 15% interest, it would take you more than 6 years to pay off this balance if you made payments of only $100 per month?  By increasing your payment to $250 per month, you would cut the time needed to pay off this balance by more than 4 years and would save more than $2,000 in interest. 

If you're serious about getting out of debt, here's what you need to do:

  • First, make a list of all of your debts, including the interest rates that they charge.

  • Next, figure out the most that you can reasonably afford to pay towards your debts each month, allocating as much as possible to the debts with the higher interest rates.

  • Finally, stick to your plan. No excuses.

Building Up Your Nest Egg

If you're looking to build up your nest egg, your best bet is to try to save systematically.  By investing just $100 per month into a mutual fund that yields 8% per year, your account will grow to be worth $7,500 after five years and $18,000 after ten years. 

Finding ways to save systematically is easy. Make your first stop your employer's benefit department and ask them about the different investment opportunities that are available to you as a "payroll deduction".  Most employers offer a variety of opportunities, including a pre-tax retirement savings plan such as a 401(k) or 403(b) plan, the choice of having money directly deposited into your savings account, and the option to purchase U.S. Treasury Bonds or even shares of your employer's stock. 

Financial institutions also provide opportunities to help you save systematically.  If you prefer the safety and convenience of a bank, sign up for one of their savings programs such as the old-fashioned Christmas Club.  Otherwise, select a few quality mutual funds and instruct them to automatically withdraw a set amount of money from your bank account each month to purchase additional shares of their funds.  Known as dollar cost averaging, this technique will help you build up your portfolio while reducing the risk associated with owning mutual funds.

Don't Delay

Now's the time to take a look at your savings and debt reduction goals and put together a systematic plan that will help you attain those goals.



If you're married, and you and your spouse need some guidance, check out


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Income Taxes

Saving and Investing



  • Returns on second extension due 10/15/01

  • Someone making $100,000 per year will go over the social security max of $80,400 this month

  • Update your net worth statement using 9/30 information

2000 & 2001 TAX FACTS

  • For 2000, the standard deduction for a single individual is $4,400 and for a married couple is $7,350. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes, real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses. For 2001, the standard deduction has been increased to $4,550 for a single individual and $7,600 for a married couple.

  • For 2000, the personal exemption is $2,800. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. The personal exemption has been increased to $2,900 for 2001.
  • The maximum earnings subject to social security taxes has been increased to $80,400 in 2001 from $76,200 in 2000.
  • The standard mileage rate has been increased to $.345 per mile as of January 1, 2001 from $.325 per mile during 2000.
  • The maximum annual contribution to a 401(k) plan or a 403(b) plan remains at $10,500 for 2001, and has been increased to $11,000 for 2002.

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