|Realizing long-term capital gains
||Long-term capital gains are taxed at lower rates than short-term gains and regular income. See Chapter 5 for basic capital gain rules. See Chapter 30 and Chapter 31 for discussions of special investment situations.
|Earning qualifying dividends
||Qualified dividends (4.2) are subject to the reduced tax rates for long-term capital gains.
|Earning tax-free income
You can earn tax-free income by—
- Investing in tax-exempt securities. However, before you invest, determine whether the tax-free return will exceed the after-tax return of taxed income (30.10).
- Taking a position in a company that pays tax-free fringe benefits, such as health and life insurance protection. For a complete discussion of tax-free fringe benefits, See Chapter 3.
- Seeking tax-free education benefits with scholarship arrangements, qualified tuition programs and Coverdell ESAs; See Chapter 33.
- Taking a position overseas to earn excludable foreign earned income; See Chapter 36.
- Investing in Roth IRAs; See Chapter 8.
You can defer income to years when you will pay less tax through—
- Deferred pay plans, which are discussed in Chapter 2.
- Qualified retirement plans such as 401(k) ...