Take steps now to reduce your taxes

The year is drawing to an end and tax

season is quickly approaching. Although

appropriate financial planning is a yearround

concern, now is a good time to take

steps to help reduce the impact of taxes on

your finances and to get a

jump start on next

year's planning. I

have detailed here

some useful information

to get you started.

* If you were

fortunate enough to

realize capital gains this year, you may offset

those gains by selling stock or other

securities at a loss. Long-term capital gains

result from the sales of capital assets such

as stocks or bonds held for longer than

one year. The maximum long-term capital

gains tax rate is 20 percent.

* If your capital losses exceed your capital

gains, you may deduct the losses dollarfor-

dollar against ordinary income up to

$3,000. Any excess losses (over the $3,000

limit) may be carried over to future

years and, maybe, future tax savings.

* Be careful of "wash sales." If you plan

to repurchase the same security you sell to

generate a capital loss, the loss will be disallowed

if a "wash sale" occurs. The "wash

sale" rule states: "You may not take a loss

if, within a period beginning 30 days

before you sell your security and ending 30

days after that date (a period covering 61

days), you have acquired substantially

identical stock or securities." If a wash sale

occurs, the loss is deferred until the newly

acquired stock is eventually sold or disposed

of. The risk of being out of the

market is that your security might appreciate

in value within the 30-day period. You

would then be forced to repurchase at a

higher price.

* If you have purchased the same stock

at different times and plan to sell some,

you can reduce your capital gain by

instructing your financial consultant to sell

those shares with the highest cost basis

first. According to IRS regulations, if you

do not provide specific instructions, the

shares you have held longest will be sold

first.

* Gift away what you don't need. You

may gift up to $11,000 ($22,000 for married

couples) per individual without triggering

a gift tax liability.When you gift

away a portion of your assets, those assets

and all their future appreciation, dividends

and interest are removed from your gross

estate. Keep in mind that any medical and

tuition payments made directly to the

provider are not considered gifts and are

therefore excluded from the $11,000 gifting

limit.

* Consider taxable bonds for your

accounts. Investments that pay fully taxable

interest including Treasuries, preferred

stocks, mortgage-backed securities

and the like are an important part of a

properly allocated portfolio. However, you

don't have to pay tax on your income

immediately; let interest compound taxdeferred

by buying these investments for

your IRA or other qualified retirement

account.

And, while we're on the subject of

retirement plans:

* Increase contributions to your

employer retirement plan. Not only will

you accumulate more for retirement, you

will also receive immediate tax deferral on

those contributions. Better still, many

employers offer matching contributions.

So, if your employer offers a 401(k) or an

alternative tax-deferred qualified plan, take

full advantage. Under current law, you can

contribute up to 100 percent of your salary

to a maximum of $11,000 ($12,000 for

those age 50 and older with the catch-up

provision).

* Not covered by a plan at work?

Contribute the maximum to either a Roth

or traditional IRA. You can fund your

2002 IRA until April 15, 2003. The maximum

contribution for an individual is

$3,000, $3,500 if you're age 50 or older. If

you have a non-working spouse (or if your

spouse elects to be treated as a nonworking

spouse), establish a spousal IRA you

may make combined contributions up to

$6,000 ($7,000 if 50 or older). And, making

your 2003 contributions early in

January can add many months of interest

to your nest egg.

* If you're self-employed, establish a

qualified retirement plan. Set up a Keogh

or Simplified Employee Pension Plan

(SEP). You'll be able to shelter up to 25

percent of your income per year in

most cases, to a maximum of $40,000. The

last day to establish a Keogh is Dec. 31,

2002. You have until April 15, 2003 to

establish a SEP later if you have an

extension.

These are just of few of the tax savings

ideas you can use now. Of course, you

should review these ideas with your tax

and financial advisors before taking action.

Salomon Smith Barney does not provide

tax or legal advice.We recommend

that you review your complete financial

situation with your tax advisor before making

any major changes to your portfolio.

Kathy DiCenso is a financial consultant

with Salomon Smith Barney in Reno.