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How You Can Get a Taste of Mitt Romney's Low Tax Rate


Mitt RomneyOn Tuesday, Republican presidential candidate Mitt Romney released his tax returns, setting off an intense flurry of commentary. If you're angry that Romney only paid about 14% of his $21.6 million income in taxes, you're not alone.

But if you channel your anger toward capturing some of the same tax benefits Romney used, you can save on taxes too.

How Did He Do It?

I won't suggest that all of us should go join private equity firms. But many of the other ways Romney saved on his taxes are available to everyone.

First and foremost, Romney's return shows how much better investment income gets treated than what you earn from your job. Not only does your paycheck get taxed at up to 35%, but you also have to pay a big load of Social Security and Medicare taxes on top of it.

On income from investments, you can forget about Social Security and Medicare. And if you invest in stocks or mutual funds that pay the right kind of dividends, you can cut your tax rate to as low as 0% on that income -- if you're in one of the two lowest tax brackets.

Once you've got some money invested, profits also get a lower tax rate -- as long as you aren't a quick trader. Hold a stock or other investment for longer than one year, and you'll get a rate between 0% and 15% on any gains.

Finally, one of Romney's biggest successes came from his retirement accounts. You won't be able to match his multimillion-dollar IRA balance, but by putting your best investments in an IRA, you avoid having to pay tax on profits until you pull the money out. Meanwhile, you can get a nice tax deduction now for the money you put into an IRA or 401(k) plan at work.

No matter what you think about Mitt Romney's taxes, it's up to you to make sure that your own taxes are as low as they can be. By making smart investing a higher priority, you can earn yourself a big tax cut.

Motley Fool contributor Dan Caplinger cuts his taxes every way he can. You can follow him on Twitter here.

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Cities with the Lowest Tax Rates

The total amount of tax you pay reaches far beyond what you owe the federal government. Depending on where you live, most likely you're required to pay additional taxes, including property and sales tax. The disparity between the amount of tax you pay in a low-tax city and that in a high-tax city can be dramatic. Living in any of these 10 cities could save you a bundle, although the exact amount may fluctuate based on your income and lifestyle choices.

Cities with the Highest Tax Rates

Much ado is made in the press about federal tax brackets, but cities can carry a tax bite of their own. Even if you live in a state that has no income tax, your city may levy a variety of taxes that could eat away the entire benefit of living in an income tax-free state, including property taxes, sales taxes and auto taxes. Consider all the costs before you move to one of these cities, and understand that rates may change based on your family's income level.

Great Ways to Get Charitable Tax Deductions

Generally, when you give money to a charity, you can use the amount of that donation as a deduction on your tax return. However, not all charities qualify as tax-deductible organizations. While there are many types of charities, they must all meet certain criteria to be classified by the IRS as tax-deductible organizations. There are legitimate tax-deductible organizations in many popular categories, such as those listed below.

A Freelancer's Guide to Taxes

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.

Tax Deductions for Voluntary Interest Payments on Student Loans

Most taxpayers who pay interest on student loans can take a tax deduction for the expense ? and you can do this regardless of whether you itemize tax deductions on your return. The rules for claiming the deduction are the same whether the interest payments were required or voluntary.

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It’s been said the US goes to war to protect its oil supplies, but doesn't it really go to war to ensure the continuation of the petrodollar system?

The Iraq war provides a good example. Until November 2000, no OPEC country had dared to violate the US dollar-pricing rule, and while the US dollar remained the strongest currency in the world there was also little reason to challenge the system. But in late 2000, France and a few other EU members convinced Saddam Hussein to defy the petrodollar process and sell Iraq's oil for food in euros, not dollars. In the time between then and the March 2003 American invasion of Iraq, several other nations hinted at their interest in non-US dollar oil trading, including Russia, Iran, Indonesia, and even Venezuela. In April 2002, Iranian OPEC representative Javad Yarjani was invited to Spain by the EU to deliver a detailed analysis of how OPEC might at some point sell its oil to the EU for euros, not dollars.

This movement, founded in Iraq, was starting to threaten the dominance of the US dollar as the global reserve currency and petro currency. In March 2003, the US invaded Iraq, ending the oil-for-food program and its euro payment program.
There are many other historic examples of the US stepping in to halt a movement away from the petrodollar system, often in covert ways. In February 2011 Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), called for a new world currency to challenge the dominance of the US dollar. Three months later a maid at the Sofitel New York Hotel alleged that Strauss-Kahn sexually assaulted her. Strauss-Kahn was forced out of his role at the IMF within weeks; he has since been cleared of any wrongdoing.

War and insidious interventions of this sort may be costly, but the costs of not protecting the petrodollar system would be far higher. If euros, yen, renminbi, rubles, or for that matter straight gold, were generally accepted for oil, the US dollar would quickly become irrelevant, rendering the currency almost worthless. As the rest of the world realizes that there are other options besides the US dollar for global transactions, the US is facing a very significant - and very messy - transition in the global oil machine.

January 30 2012 at 10:52 AM Report abuse rate up rate down Reply

**** THE TEA PARTY AND **** ******* REPUBLICANS. **** ALL RACIST ******* BASTARDS. DEATH TO ALL. ALL OF YOU WHITE ************* ARE ******* UP EVERYONE'S ******* LIVES.

January 30 2012 at 10:08 AM Report abuse rate up rate down Reply

This article does not mention two important facts crucial to a fair tax rate for all.

First, it fails to mention the double taxation of corporate earnings. For example: let’s say I am the sole owner of a corporation which earns 100 million; it will pay corporate taxes of up to 35%, then let’s suppose it distributes the entire 65 million to me and I pay 15% personal income tax on that. I get to keep 55.25 million and 44.75 goes for taxes. That is a 44.75% tax rate. Suppose that instead of paying out the 65 million the firm retains 50 million to reinvest in the business ( creating greater value as well as jobs) and I sell part of my stock at a gain. I contend that the income I have is still taxed twice at a much higher combined rate than 15%. If I only own 10% of the company or 1% the analysis is no different. If the company only pays a 20% corporate rate (average for U.S. companies) then the combined tax rate is 32% (20% + .15 X 80 = 32%).

Secondly, Mr. Buffet, and Mr. Obama like to include Social Security and Medicare premiums as a tax. OASDI, paid equally by individuals and their employers (usually a corporation) is a quasi-insurance program and these payments are akin to insurance premiums. When I started working that is what they were called. In recent years 47% of working adults paid no income tax or a negative income tax. When you present an article discussing a fair schedule of taxes for all Americans you should present a balanced view. Perhaps calculating the actual rate paid by a number of representative individuals at selected earnings levels.

January 29 2012 at 5:12 PM Report abuse +1 rate up rate down Reply
1 reply to jpsnyder46's comment

This is a looney lib article. What do you expect?

January 29 2012 at 9:18 PM Report abuse +2 rate up rate down Reply

Everyone pays the same taxes on their investment dollars. We're fortunate that he's reinvesting his hard earned money back in our economy. He earned lots of money and paid a higher rate of taxes when he earned it. Now he's being taxed again for the earnings from the money he's already paid taxes on. Our current president was out creating hate between the American people as a street organizer instead of earning an honest living at that time inspiring articles like this one by the Huffington smutrag. Thank you very much.

January 28 2012 at 6:53 PM Report abuse +2 rate up rate down Reply

The author suggests you be "angry" at Romney.

This is another lefty political hit-piece by the partisan extreme-left "media". Romney gave 15% to charities. That's part of why Romney paid less in taxes

Obama in 2010 paid only 23% of his $1.8 million income in 2010. Angry yet? His income in 2009 was $5.66 million. He can live like a Billionaire on tax-payer money - Michelle took a 6 day trip to Spain with 40 of her closest friends, the travel costs reportedy around $375,000 - you paid for it. Angry yet?

Taxes used for a corrupt "stimulus" - Trillions wasted. Angry yet? A total waste of money - millions of jobs lost (a few government jobs "saved". Angry yet? (While Romney created tens of thousands of jobs.)

Executive-ordered taxes (not by Congress) for CO2 production (that's the air you exhale - and plants inhale) - raising everyone's cost of living. Angry yet?

Any "anger" left for AOL/HuffPost and the media for their leftist propaganda (check out the other stories on this site).

January 28 2012 at 4:52 PM Report abuse +4 rate up rate down Reply

Why is AOL/HuffPost still running this lefty political hit-piece - this Obama propaganda?

January 28 2012 at 4:15 PM Report abuse +2 rate up rate down Reply

If you're in the 35% tax bracket you're making a pretty good living ($379,000) so I wouldn't complain too much.

January 28 2012 at 7:56 AM Report abuse -1 rate up rate down Reply
1 reply to rgrsjolly's comment

Easy to say if its always the "other guy". With an Obama increased tax of 4.6%, a single person would have to pay at least $8,234 in yearly taxes. (IN ADDITION under Obama, he or she would pay another 4.6% in taxes because of his cap on deductions.)

That means in reality a total of an additional tax of about $16,500.00.

(That's a BIG chunk of the money you have remaining after paying all your taxes and bills - all in the name of political class warfare).

Obama is engaging in the demagoguery of class warfare - a classic communist/socialist strategy - which would actually hurt the economy - all for the sake of his leftist crony agenda and to divert attention from his failures.

I guess its easy for some to fall for - but I'll bet if you were working hard to earn your "pretty good living", and already overtaxed, you would complain if the leftists in government wanted to take more of your money.

January 28 2012 at 5:40 PM Report abuse +3 rate up rate down Reply

Google conservation easements folks......I dont sell them and I wont tell you who does but you can pay less in taxes than ronmey does.....you can pay little to NO taxes on your income and this is a GIFT from the government,Im talking IRS tax code legal ways to pay little to no taxes....CONSERVATION EASEMENTS...take the money you pay in taxes and invest into one of those and the government can kiss your ass.Its their own rules.

January 28 2012 at 7:29 AM Report abuse rate up rate down Reply

Tax deductions and loopholes for EVERYONE should be reduced--especially corporate tax credit schemes and loopholes which allow billion-dollar-profit corporations to pay NO taxes. Concurrently, the top tax RATES for EVERYONE--corporations included--should be REDUCED.

January 28 2012 at 7:16 AM Report abuse +4 rate up rate down Reply
1 reply to cnsrvativ's comment

No they shouldnt,15% rate is too damn high.The government needs to cut way the hell back.They work for us,we we dont work for them.....we shouldnt be paying more than 5% taxes,this country doesnt need to be the worlds police force anymore or ever again.We dont need soldiers stationed all over the world.The government needs to be TINY.

January 28 2012 at 7:26 AM Report abuse +2 rate up rate down Reply

This is so unfair I just lost my job and receiving unemployment I have to pay 17% on that small amount of money each week in taxes.

January 28 2012 at 6:23 AM Report abuse +2 rate up rate down Reply