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Reducing income taxes

We are a couple in our 50s, combined income of $37,000/year, house paid for, and children educated and on their own.How can we reduce our income taxes? I.M.

Few cries for help are as widespread as the desire to somehow avoid more income taxes. You are particularly affected because of bracket creep -- inflation income pushing you into higher and higher brackets with few deductions available. You are also in what I call the "recovery period" -- after children are gone and before retirement. Most assets for increasing retirement income are accumulated between the ages of 55 and 65. With the aim of accumulating assets and avoiding taxes, you should look into various tax shelters -- oil-drilling partnerships, real estate, Keogh or IRA if you are eligible, and investments that produce little current income but promise future growth.

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All of these plans aim to postpone the receipt of income until after retirement when, presumably, your income will be taxed at a lower rate. Certain tax shelters, such as oil-drilling partnerships, offer investment of before-tax dollars and some long-term capital gains of which only 40% are taxable at ordinary income rates. Other tax shelters, such as tax-free bonds, invest after-tax dollars. One source of tax saving ideas is "Tax Angles," a monthly newsletter published by Kephard Communications Inc., 901 N. Washington St., Alexandria, Va. 22314.

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