My taxable income is $60000/-Why are the investment options to reduce tax?

Answer 1

If you are asking what not why there are several options. For the bond part of your investments, look at municipal bonds from your state (if you pay a state income tax). No state and no federal tax required on the interest, but some on the capital gains. Some muni bonds are subject to the alternate minimum tax. Check with the fund you are thinking of. For the equity side of your investments, look at individual stocks that are blue chip growth oriented with a low "qualified for the 15% rate" dividend yield. Do not buy trusts, their dividends are not "qualified." Look for mutual funds that have a low turnover ratio (high ratio means hidden extra expense to you and high short term capital gains taxes), & low dividend yield. Some may have "Tax-managed" in their name. Index funds are good to reduce taxes as their turnover is usually very low. If there is an investment you want that is not tax efficient, and that taxable income is earned income, you can put it into a ROTH IRA (paying taxes on the contribution now, but all earnings, dividends, interest, capital gains are tax free). A regular IRA and 401k 2 other ways to invest and defer taxes until you retire and your tax bracket is lower.

Answer 2

you have a ton of misconceptions. in the experience that your base income is 40 two,000, your taxable income IS below the 15%->25% cutoff. No way that $8000 much less a year, which may be $307.sixty 9 much less biweekly, would in basic terms shrink your paycheck via around $a hundred. that would advise the tax cost grow to be around 70% on that final $307 - does not take place. You for sure have no information of how tax brackets artwork. 25% bracket does not advise your complete taxable income is taxed at 25%, the calculation you for sure used to come back up with your "around $a hundred" diffeerence in takehome - in basic terms the quantity of taxable income over the cutoff would be taxed at 25%. Your 10,six hundred/5200 quantity are nowhere on the threshold of reality. you in basic terms get a deduction for charitable donations in case you itemize. in case you gave away $8000, which would be sufficient to itemize, yet would in basic terms shop $1200 tax at maximum, much less in the experience that your different deductions are not sufficient to itemize. something, $6800 a minimum of, would come out of your person pocket. Your question is a appropriate occasion of "somewhat understanding is a risky element" considering you arise with all styles of incorrect solutions. confident, you get carry of it actual on the threshold of all incorrect, sorry. or consistent with hazard no longer sorry - your federal income tax would be nowhere close to as undesirable as you think of. the only element you do have extraordinary nonetheless, is that contributions to a 401K will shrink your taxable income. There may be a shrink on how plenty you are able to make contributions nonetheless - examine with your corporation.