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Small savers offered a 6-month certificate for tax shelter

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"Small" savers with $10,000 or less to set aside have a new way to protect their interest from taxes, thanks to recent changes in the US Tax Code. Simply put, the "shelder" provides a way for banks to defer paying interest earnings to the customer until 1981. That means the taxes on the interest don't have to be paid until 1982.

The Tax Code changes permit each taxpayer to exclude Jan. 1, 1981. For a joint return, the exclusion doubles to $400.

Taxes now are required on all bank interest earnings.

To help depositors take advantage of the Tax Code change, banking institutions are offering what is in effect a "sheltered" six-month $10,000 money-market certificate.

With the certificate, according to a spokesman for Perpetual Savings & Loan, Washington, the tax bill is deferred until 1982. Moreover, if you are a small saver, you might even be able to exclude most of the tax due on the interest the certificate earns.

At First Federal Savings & Loan Association in Annapolis, Md., the new certificate is called "Sheltered Income Money Market Certificate." First Federal is actively promoting it in Baltimore-area newspapers. If the saver takes out a First Federal money-market certificate after July 3 and request a "sheltered income option," the certificate will not mature until 1981. Any tax due on the earnings, however, will not have to be paid until 1982.

Under a conventional money certificate at First Federal, interest earnings would have to be posted monthly, which means a portion of the earnings would be chargeable to 1980 taxes. That tax would in turn have to be paid in 1981.


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