Protect Profits At Tax-Time

Protect Investments at Tax-Time

some of my favorites:

Roth IRAs. There's no immediate benefit to putting money into a Roth IRA, but in the long term, they are golden. Money pulled out in retirement is not taxed. An early start allows you to compound more money in earnings than you contribute, and pulling it out tax-free allows for great planning opportunities in retirement. You can still put $4,000 in a Roth IRA for 2007 ($5,000 if you're at least 50) and $5,000 for 2008 ($6,000 for those 50 and older). Folks who earn more than $99,000 (single) and $156,000 (joint filers) make too much to contribute to a Roth IRA. They can consider plowing money into a traditional, nondeductible IRA so that in 2010, as current tax law allows, they can move that money over into a Roth IRA.
(note: does this mean we can rollover and IRA into a Roth IRA in 2010? I hope to open a Roth IRA Index Fund that either follows the S&P 500 or an International index or mix)

-- Individual stocks. The purpose of investing in individual stocks, of course, is to see them go up so that you earn money when you sell them. If it works according to plan, you'll have to pay 15 percent capital gains tax on the long-term profits you reap by selling a stock. That's instead of the 25 percent or higher rate you're likely to pay on ordinary income, so they're already a good tax deal. But individual stocks come with a tax bonus: If you find yourself losing money, instead of making it, you can sell your shares and use that loss to reduce the other taxes you owe. There's no better cost-efficient way to cut investment taxes than to carefully manage an individual stock portfolio so that you're always reaping your losses.

-- That 401(k). It's at the bottom of the list, only because you've heard it so many times before. It's hard to beat the advantages of a decent 401(k), especially if your company is matching your tax-deductible contributions. To maximize its tax-saving properties (and if you're investing elsewhere in staid, low-tax products), fill it with the kinds of investments that you'd otherwise pay high taxes on: real estate and bond funds and aggressive, high turnover stock funds.