Thats a fancy way of saying forex!

Forex brokers at the retail level did not exist because these institutions monopolized the foreign exchange due to their abilities to have access to information and data that allowed them to hedge their interests and profit from the monetary policy that the average investor could not get to very easily. This, combined with government regulations and the huge volume required in trades to maintain adequate liquidity,  prohibited the small speculator from participating.

Access to the currency markets changed however, first with the invention of the internet… this new and exciting information super highway opened the doors to allow anyone virtually instant access to the same macro-economic events, news and data that the large world banking institutions had previously dominated. Combine this new fangled world wide web with legislation by the CFTC and we soon found ourselves with a retail market for individual traders to have the same abilities to trade currencies as the big boys.

What Are The Differences Between Brokers?

In order to access the forex as a retail trader, we need brokers to provide us with a platform to trade from, liquidity and reliable execution of our trades. Much like a stock broker, the forex broker acts as  an intermediary for these ( relatively speaking) small trades, and they also can assist in advice, recommendations etc. Each brokerage house can have different commission rates, minimum balances and account requirements that make it essential for any forex trader to research and become familiar with before opening an account.

Before selecting a brokerage firm, it’s important to understand the basic differences from one to the other, and also to have a good understanding of what your choices are. Forex brokers, for the most part, fall into one of two categories. There are Market Makers, also referred to as “Dealing Desks” and there are Straight Through Processing Brokers (STP), also referred to as “Non Dealing Desks”.

Market makers provide the liquidity for a given currency market themselves, and they make their money off of the spreads, (the difference between the bid and the ask) and by placing hedges, or bets against their customers. In other words, when you place a trade with a Market Maker, more then likely, they will be taking the other side of that trade in the expectation that you will lose. So…. the market maker earns money through both the spread and by hedging your bet. It seems a bit counterintuitive doesn’t it? But this is how it works… your trades are commission free, but the spreads tend to be a little wider.

Straight through processing brokers, or non dealing desks, do not create their own markets… meaning that they do not take the other side of your trade. Your order is sent straight to the recipient on the other side of your position. These brokers however, do charge commissions for each trade you place with the advantage to you being a tighter spread.

Do Your Research First

Which type of broker you choose is dependent on what type of trading you do. If you are a day trader and a scalper, then it will probably be better for you to enjoy tighter spreads and just pay the transaction fee because you are attempting to make a profit with a smaller expected move by virtue of the very short time frame with this style of trading.

Conversely, if you are a swing or a position trader, holding onto a position for days, weeks or maybe even months, then the spread is of less consequence to you because your expected move will easily overcome this.

Knowing what type of trading you will be doing is a big part of choosing which type of brokerage house is best for you, but it’s most certainly not the only research you need to do when looking at different forex brokers. You also need to be aware of fraudulent enterprises know as “bucket shops”. Bucket shops are essentially fake brokers that work out of boiler rooms acting as legitimate forex brokers. They man the phones… take your orders and then promptly drop it in a bucket, hence the name. Simply being aware that these types of scams exist should be enough to insure that you do proper research and due diligence before transferring funds to anyone.

]]> http://www.forexyellowpages.com/why-do-forex-traders-need-forex-brokers/feed 0 http://www.forexyellowpages.com/choosing-a-good-forex-broker http://www.forexyellowpages.com/choosing-a-good-forex-broker#comments Wed, 02 Nov 2011 02:56:18 +0000 admin http://www.forexyellowpages.com/?p=818 Forex broker is an intermediary between a trader and a currency market. Retail trading isn’t possible with Forex brokerage. Finding the right Forex broker among hundreds of the online firms isn’t an easy task. That’s why you need to inform yourself on the specific broker that you will want to work with and collect important information on certain aspects.

The first question you have to ask yourself is: is the broker I want to use regulated? There must be no doubt about this first point. All regulated brokers must submit financial reports to regulatory authorities, and when they fail to do it, authorities have the right to fine them or terminate their membership. This enforces Forex brokers to keep transparent financial reports.

The brokers must be regulated by their local regulatory authorities, for instance, for brokers based in the US, they must be regulated by the NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission), Swiss based brokers must be regulated by the FDF (Swiss Federal Department of Finance) and so on.

Also when a Forex broker is regulated allows investors to dispute any resolution, increasing the investor protection.

Trading conditions are very important also. This refers to the features of the trading platform and the trading conditions with the chosen broker. Amongst the most important factors are:

Spread – Obviously the smaller the spread on currency pairs the better the conditions are for investors and traders.

Platform execution – Trading execution refers to how fast and consistent are the execution of trades. Some brokers guarantee fast and transparent executions during normal market conditions.

Fractional trading – Some brokers allow investors and traders to trade on a fractional basis, instead of trading full lots “100,000 units” or “300,000 units”, they allow you to trade “163,345 units” or “325,911 units”. This is very helpful for trades risking certain percentage of their balance on each trade.

Safety of funds – We need to make sure our trading funds are kept in a segregated account or at least insured.

Customer support is very important! You need a broker with a LIVE CHAT feature so you can get in touch with a representative anytime you need for different kind of problems, like withdrawals, deposits etc.

Also you need to check the promo offers that the broker is offering you. Some brokers offer 10% BONUS on the first deposit.

MF Financial is offering up to 20% BONUS on first deposit plus an outstanding trading experience with an outstanding customer support.

MF Financial Ltd. is one of the world leading online currency trading broker offering low pips and commission-free online forex trading. Founded by Wall Street veterans, MFFX’s vision is to service individual and corporate investors such as money managers, banks, and financial institutions in easing the complexity in dealing with forex trading. Their dealing software which specialized in forex dealing is rated second to none for it user friendly environment. Lightning speed and efficient execution is one of its many benefits.

Any new investor should think twice or 10 times before choosing the right broker. I am personally a MFFX client for 1 year and I must say that I have no reason to change it. I will keep it as my trusted partner in forex trading for a long time! For any interested investor I invite you to check MF Financial`s website www.mffx.com

These  CFTC regulations led to the limitation of the number of forex brokers that accept US traders and most of the brokers available on the US market have low leverages and unfavorable trading conditions. Under these circumstances more and more US traders look for offshore forex brokers with higher leverages and better trading conditions.

Unfortunately neither the foreign brokers are allowed to accept US traders so the only option available at this moment is the binary option trading. All major binary option traders such as Ikko Trader,Anyoption, EZ Trader and Option Fire accept US traders.

The binary option brokers are licensed and regulated by trustfully boards and commissions. For example Option Fire is regulated by the Financial Services Authority (FSA), which  is the regulator of the financial services industry in the UK. So Option Fier is as secure and trustable as any English forex broker on operating the forex retail market.

All binary options brokers have high profit rates, most of them offering up to 85% profit for options expiring in the money and up to 15% refund for options expiring out of the money.

The binary options trading has many advantages compared to the traditional forex trading, the higher returns on investment and the shorter option expiration times being just the most attractive ones.

Best Offshore Forex Broker – www.MFFX.com

Recently, YB Teresa Kok asked me “Why are Malaysians so keen to leave this country? Life overseas is not necessarily easier!” I agree that life overseas is not necessarily. In fact my cousins living in Hong Kong, Singapore and London tell me regularly that they miss the food and that things are much cheaper at home. They complain about the weather, high cost of living and their long working hours. Despite this, when the possibility of coming back home is raised, they give me a smile and a shake of their heads.

Is living in Malaysia really so bad? What is it that other countries have that we don’t? Lim Kit Siang posted on his blog in December 2009 that more than 630 Malaysians are migrating overseas everyday, and that number is increasing year on year.

This is a worrying statistic and the brain drain issue is one that the current government acknowledges that it is a problem. However, the best they can come up with to make them come back are tax breaks, and tax free vehicles. From day one, it has become apparent these ‘perks’ would simply not work.

This government has a habit of tackling problems in this country by providing quick fixes. The 2012 Budget should really be called the ‘quick-fix’ budget as RM232 billion is mindlessly spent, with unrealistic economic growth forecasts to back it up.

Yes, 60% of households would receive a RM500 relief and we thank the government for it. What then? RM500 does not combat rising costs, or inflation. How far can RM500 bring us nowadays? Not very far.  In no time at all, that RM500 has become a distant memory and we are back to square one.

The Kedai 1Malaysia initiative was put in place by the government to sell cheap products subsidised by the government, and more are to be opened across the nation. Shop owners are now screaming in displeasure as they cannot possibly compete. If the government is intent on handing out subsidies, subsidise the shops which are already operating! Another poorly planned quick fix that provides no long term solution.

Where is the long term economic plan? Where is the investment in our children’s future? Fixing school buildings is an excellent initiative, but the real problem lies in the fabric of the education system.

Our children are taught to be robots, to regurgitate material and not to question their teacher. Many scoff at the lowering of standards in the ongoing PMR exams, and an Additional Mathematics SPM paper was allegedly leaked out to tuition centres. Is all this in the name of grades, just to make the Education Ministry look good? How can this system prepare our children to be competent, effective members of society? The biggest losers in all of this are our nation’s children.

A friend over dinner told me earnestly that he was preparing to leave the country for the sake of his children. As disheartening as it was to hear, he proceeded to tell me why.

His vision for his children was for them to grow up in a society in which they would not be discriminated against. Although racism is also prevalent in other countries, in Malaysia racism is institutionalised and sanctioned by the Barisan Nasional government.

Furthermore, corruption is rampant throughout all levels of government. The payment of corruption money in cases of obtaining building or business licenses is so prevalent, that many businesses have included such a payment in their expense budgets. How can this continue be the case?

These issues are all correlated, and opportunities continue to be stifled. Talented people leave because Malaysia appears to have no appreciation for their abilities. Nepotism and favouritism are practised on the basis of the “Lu tolong gua, Gua tolong lu” principle rather than getting the best person for the job.

Our English standards have been lowered in order to record more exam passes, but quality is sacrificed as a result. If even masters degree holders from local universities are unable to speak proper English, how can we then become a globally competitive nation?

After this budget, more and more people are convinced that this BN government cares only about staying in power and not for the long term development of the nation. The exodus of talented individuals will continue unless necessary reforms are put in place.

On a recent trip to the United States, on our stopover in Hong Kong, a fellow passenger remarked that they could finally talk about issues of Malaysia as they dared not voice out their displeasure at home. Recalling so many holding up their fingers to their lips to shush their friends from bringing up national issues, it is obvious that many feel that we are living under oppression.

Finally, one of my old schoolmates residing in Australia told me that he wanted to come home to take care of his parents. “But the biggest thing stopping me from coming home now is the government”. A change in government may not automatically bring Malaysians home, but what it would do is provide hope for the future of our nation, and hope for our future generations.

Change is needed, and change has to happen now.

By Dr Lim Teck Ghee

“WHAT? CHINESE POOR?”

Soon after I returned to Malaysia in late 2005, I met with a former president of the country’s major Chinese party in his office. During the discussion which covered a range of issues, I expressed my concern at the failure of the Chinese political leadership to deal effectively with the socio-economic problems and challenges that the community was facing.

I had known the leader since the 1970s but especially in the late ‘80s and early 1990s when I was a panelist in the 150-member National Economic Consultative Council (NECC) which had been set up by the then-Prime Minister, Tun Dr Mahathir Mohamad, to come up with a post-1990 economic policy to replace the New Economic Policy (NEP).

The response of the former president to my concern shocked me.

Besides defending his party and his leadership, he declared that the Chinese were very lucky to be able to live in Malaysia .  (Is this joker Long Long Sick?)

“Where else in the world can you find a simple char koay teow seller become so rich and drive a Mercedes!” was his rejoinder.

This view that the Chinese have done very well for themselves — and by extension, do not require assistance from the government — is not uncommon.

However, it is a gross generalization and erroneous on several counts.

Taken to its logical end and juxtaposed with the fact that many of the country’s richest individuals are Chinese, such a simplistic view has provided the underpinnings for the racially biased public policies pursued in a wide range of sectors and over such a long period of time in the country.

OFF THE PUBLIC RADAR

Let us consider some of these facts and figures of the Chinese poor, disadvantaged and marginalized.

Firstly, many of these Chinese individuals and households do not appear on the government’s listing of poor Malaysians because the government has used an unrealistically low poverty line income to decide who comprise the poor.

Should there be a readjustment of the poverty line to a more realistic figure, it is likely that several hundred thousand Chinese households (as well as a larger number of Bumiputera and Indian households) will fall into the “poverty” category.

Secondly, income distribution within the Chinese community is worsening.

In fact the gap between the Chinese poor and well-to-do has increased in the last two decades, for which data is available. According to the Gini coefficient of income inequality, income inequality within the Chinese community has increased from .423 in 1990 to .434 in 1999 and .446 in 2004.

Incidentally, this is the same for all the communities, including the Malays.

The worsening income inequality points to an entrenched and worsening poverty problem within the Chinese community that is not discernible if we simply rely on the conventional statistical indicators used by the government.

EXCLUDED FROM NEP

Why is Chinese poverty so entrenched and intractable?

The answer is that, for the most part,the Chinese poor and lower classes have not benefitted from the NEP and other national policies in the way that the Chinese elites or even upper middle class have.

Consider the following :

1. They have not been targeted by any of the government’s anti-poverty programmes.

2. They have been disadvantaged by lack of mastery of English and Malay.

3. They have educated their children in Chinese schools which have been the victims of unequal treatment. More than a quarter of Chinese school kids drop out before the age of 17 with many coming from the poorer achieving and less-endowed Chinese medium schools which we seldom hear or read about.

4. A large number of them live in new villages or in geographically remote rural areas which have been cut off from enclave of affluence located in the main cities and in the Klang Valley area.

5. Many come from the agricultural sector and are vegetable gardeners, fruit farmers or fishermen or engage in agricultural services.

Unlike their Malay counterpart rural poor, they have had limited access to Felda, Felcra, IADPs and other federal and state schemes that have reduced landlessness and indebtedness and provided access to housing, infrastructure, utilities as well as enhanced incomes substantially. Even worse, they have been denied their legitimate land rights so that many remain squatters or operate on TOLs or short-term leases.

The recent report that the new MCA president Datuk Seri Dr Chua Soi Lek intends to meet with Perak Menteri Besar Datuk Seri Dr Zambry Abdul Kadir to discuss matters pertaining to squatters, land premiums and discounts to new villagers and the issue of limited allocations shows how “lucky” the Perak Chinese are to be able to live in the state and the “tremendous” advances they have made after 50 years of Barisan Nasional rule.  (He should produce more sex video with his as main actor- do u know who is this HE??)

6. In the discussions on the country’s brain drain and loss of talent, much has been made about the out-migration of Chinese educated and professionals. In fact, if the proper surveys are ever carried out on out-migration from the country (according to the deputy foreign minister in Parliament recently, 304,358 Malaysians migrated to other countries from March 2008 till August 2009 compared with a out-migration figure of 139,696 in 2007), I will not be surprised if just as many less educated poor and lower middle-class Chinese are found to have left the country because of poverty and lack of opportunities for themselves and their children.

CHINESE SMES AND OTHER TOWKAYS

Much has also been made of the prosperity of the Chinese that comes from their domination of the small and medium enterprises (SMEs) in the country. However, not all SMEs are prosperous or can provide the secure and sustainable livelihood and incomes that others who are ignorant of the real conditions of these enterprises seem to imagine is the case with every SME.

Most Chinese SMEs are family-run businesses that are barely able to scrape a decent living through heavy self-exploitation of family members and extended family labor. Often working in dangerous and appalling conditions, they are ill-equipped to compete in an increasingly competitive and globalized environment.

The reality is that besides continuous harassment from government officials and politicians bent on extracting coffee money and beating them down for non-compliance with various local council rules and regulations, many SMEs are trapped in low productivity operations and lack access to technological know-how, larger markets and R&D capacity.

In the near term as regional and international competition heats up, many SMEs face a bleak future and are likely to go bust.

These small-fry “towkays” of micro-SMEs (over 90 per cent of the SMEs in the country belong to this group) and their poorly paid employees, eking out a modest living in the country’s workshops and squatter areas, however, have never been on the government’s radar screen, except perhaps for taxation purposes.

How much (or rather little) budgetary support and other assistance has actually reached the SMEs — directly and not through proxies or parasitic agencies — in the last few Malaysia Plans would be an important question for the government to respond to.

Members of the National Economic Advisory Council (NEAC) will find that there is a whole generation of bad policy planning and implementation that needs to be undone with regard to the SMEs if they are serious about the objective of revitalising this sector in the 10th Malaysia Plan and the New Economic Model.

NO SOCIAL SAFETY NET

There is one more important consideration that is seldom discussed when the issue of Chinese social-economic well-being is raised. This is that arising from their self employment or work as employees in SMEs and the informal sector, only a small proportion of Chinese households are covered by the social safety net for health, insurance and old age that comes with employment either in the public sector or with formal private sector employment.

This absence of participation in a social safety net will increasingly make itself felt on the future well being of the Chinese as the community ages rapidly and with the loss of traditional safety nets provided by the extended and large nuclear family.

The trend of Chinese vulnerable elderly who are either abandoned in old folk homes or live in miserable conditions on their own is already gaining speed. This trend is unstoppable without major changes taking place within the community and at the macro level where the state is the key player.

MALAYSIA’S PRESENT, FUTURE AND PAST

Will the 1 Malaysia concept and New Economic Model remove the blinkers that stand in the way of assistance and resources being provided to the Chinese disadvantaged?

Will the prime minister’s promise of raising income levels of all disadvantaged and marginalized groups be kept?

Will we see merit-based, transparent and needs-based policies targeting the bottom 40 per cent of the country’s income strata, irrespective of race and region, implemented?

We will have the opportunity to assess if this new vision of development for the country is more political rhetoric or a genuine path-breaking initiative soon.

As for me personally, I am not so sanguine. I was a member of the five- person team that finalized the NECC report which was presented to the government after more than two years of acrimonious debate.

The major recommendations of the NECC to dismantle the NEP were never implemented.

The NEP remained in force for another 20 years after it was supposed to have ended in 1990.

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A talk with one of my mentors, a senior enlisted member in my squadron, made me rethink the way I viewed investing. During one of our conversations I brought up the topic of investing and mentioned I would like to start in a couple years when I had more money. He listened to me give several excuses why I couldn’t invest and then he said something that changed the way I think and act about investing.

He told me saving and investing wasn’t hard, you just have to treat it like a bill. He said, “When your paycheck comes in each month, you pay your bills, right?” I nodded. “So treat investing like a bill. If you want to max out your Roth IRA, divide the maximum contribution by 12 and send that amount to your investment account each month. If you want to make it easier, then go to the finance office and set up an automatic allotment from your paycheck and you’ll never think about it again.”

It turns out he was right. It’s not that I didn’t have enough money to invest. I just wasn’t prioritizing how I used my money. Treating investing like a bill forced me to make investing part of my budget. I followed his advice and set up an automatic withdrawal from my paycheck and I began investing in a Roth IRA. I maxed out my IRA contributions in each of the eleven years following our conversation. That 15 minute conversation literally changed my life and might just make me a millionaire by the time it’s all said and done.

This concept of paying yourself first applies to different types of investments as well. Perhaps the most common way to take advantage of automatic investing is through an employer sponsored retirement plans such as a 401(k) plan, 403(b), 457(b), or the Thrift Savings Plan. You can also apply this to savings goals, Roth or Traditional IRAs, or taxable investments. In fact, many brokerage firms will waive account minimums if you agree to fund your account with a minimum contribution each month. Some brokerage firms even offer lower transaction costs with automatic investments.

Here are three reasons you should consider automatic investing.

It’s easy. You don’t have to remember to do it. Just set it up once and you know it will get done.

There is no emotional barrier. It can be difficult to write a check each month for a future goal when you have current wants you could easily fulfill with those funds. Automatic investing makes it easier to stick to your long term plans.

You don’t try to time the market. Market timing is almost always a losing battle. For the average investor, dollar cost averaging can be a great way to avoid market timing and ensure you get your money in the market for a longer period of time. Automatic investing gives you the greatest opportunity to realize the growth of compound interest.

Ryan Guina is a U.S. military veteran, writer, and professional in the corporate world. He blogs at Cash Money Life and Military Finance Network.

Trade Forex
Mini Forex Trading – MF Financial Ltd.

Dissecting the Deal

Buffett’s firm, Berkshire Hathaway (NYSE: BRK-A – News), agreed to buy Burlington Northern Santa Fe Corp. (NYSE: BNI – News) for $100 a share valuing the deal at $44 billion.

Over the past year, Burlington’s stock price has lagged the performance of its peer benchmark, the Dow Jones Transportation Average (NYSEArca: IYT – News).

How much did Buffett pay?

The analysts surveyed by Bloomberg, say he paid 18.2 times Burlington’s 2010 estimated earnings, which is higher than the S&P 500′s multiple according to the same analysts. Not very Buffett like, especially considering he rarely pays a premium when putting new capital to work. The only other plausible explanation is that Buffett sees hidden value in Burlington.

A Consummate Contrarian

As a contrarian to the bone, Buffett decided to pull the trigger on a company within an ailing industry sector. Through the November 2nd market close, transportation stocks have lagged the entire U.S. stock market (NYSEArca: VTI – News) by a substantial margin of 15.94%.

The recent activity of rail traffic is depressed. This is a key barometer of economic health.

The Association of American Railroads reported that for the week ending October 10th, 2009, rail traffic declined 17.2% compared to the same week in 2008. The report also shows weak demand for the transportation of goods throughout the entire U.S. On the East coast, carloads were down by 19.7% and in the West they were off by 15.4%.

Interpreting the Deal

As an insurance executive, Buffett knows a thing or two about betting. And over the years most of his bets (at least the important ones) have paid off handsomely. Some, however, did not.

In the early 1990s, Buffett’s $358 million investment in U.S. Airways was virtually wiped out. In a letter to shareholders he quipped, ‘How do you become a millionaire? First, you become a billionaire then you invest in an airlines company.’

With this latest deal, even Buffett himself admits that the Burlington deal is a gamble.

‘It’s an all-in wager on the economic future of the United States,’ he said.

Conclusion

No doubt, analysts, fund managers and others with a bullish bias have already begun misinterpreting Buffett’s $44 billion gamble as a sure sign the worst is over. It’s time to break out the champagne!

A bedazzling 80% of economists now believe the worst economic recession of our generation is over. And around 100% of them never saw the recession coming.

Even though Warren Buffett’s latest buy may be viewed as an act of genius, it may not necessarily signal that a market bottom has been reached. This was recently covered in ‘What’s Next- Minor Correction or Major Collapse.‘

Regardless, the belief that Warren Buffett can do no wrong is an investment myth that won’t die soon. His billions prove that he’s always right, right?

It calls to mind the wonderful lyrics in a song from Fiddler on the Roof.

‘When you’re rich, they think you really know.’

Related Articles:

The World’s Most Powerful Billionaires

Warren Buffett The Newspaper Delivery Man

Warren Buffett Takes Charge

What Will Warren Buffet Do?

Warren Buffett’s Option Investments

The Mistakes We Make and Why We Make Them

]]> http://www.forexyellowpages.com/does-buffetts-big-acquisition-signal-a-market-bottom/feed 1 http://www.forexyellowpages.com/thank-heaven-for-legal-tax-havens http://www.forexyellowpages.com/thank-heaven-for-legal-tax-havens#comments Sun, 01 Nov 2009 14:50:44 +0000 admin http://www.forexyellowpages.com/?p=719 If you’re like most Americans, you don’t have a secret bank account in Switzerland where you stash money to keep it out of IRS hands.

Being out of the foreign tax-shelter loop isn’t such a bad thing. Uncle Sam recently signed a new tax treaty with that Alpine nation that should help U.S. collectors crack down on tax-evading owners of a foreign bank accounts.

But there still are plenty of  legal tax havens for law-abiding taxpayers. Even better, most regular Joe and Jane taxpayers can easily take advantage of them.

Gimme Shelter

If you own a home, your actual shelter is probably your best tax shelter. Your house’s tax-cutting opportunities start as soon as you buy it and continue until you sell it.

You get deductions for all or part of your mortgage interest, points paid to get the loan, interest on certain home equity loans, and your annual property tax payments. These write-offs can help reduce your tax bill each filing season.

Then there is the profit on your home’s sale. That’s money the IRS can’t touch.

“The biggest thing in real estate that would apply to most people is the primary residence sale exclusion,” says Mark Luscombe, principal federal tax analyst at CCH in Riverwoods, Ill., a provider of tax information and services.
Under this tax code provision, up to $250,000 in sale profit for a single taxpayer, twice that for a married couple filing a joint return, is not taxed. “If you sell before your gain gets to that point, you can avoid ever having to pay tax on the residence,” says Luscombe.

The beauty of this home-related tax shelter is that it applies to every principal residence you ever own as long as you meet the IRS rules. The key requirement is that you live in the home two of the five years before you sell.

“There are instances where people will buy a fixer-upper and live there for two years while fixing it up and then sell it at a profit. And though a lot of that profit can be attributable to their sweat equity, they still qualify for home sale exclusion,” says Bob D. Scharin, senior tax analyst from the Tax & Accounting business of Thomson Reuters in New York City.

Investment Opportunities

Investment real estate also offers some tax-shelter opportunities.

“One thing with real estate that puts it in that tax category as a more conventional shelter is that you can make a small down payment on real estate yet base your depreciation deduction on the entire purchase price,” says Scharin.

Along with the depreciation on the investment property, you also get mortgage interest and real estate tax deductions, as well as a write-off for upkeep and maintenance costs.

Of course, when you sell investment real estate, you will owe capital gains on the profit. But you might be able to delay that bill by taking advantage of another tax law.

Exchange Advantages

Internal Revenue Code Section 1031 offers you a chance to postpone paying taxes on investment property by swapping it for another. Also known as a like-kind exchange, you sell a property and then use those proceeds to purchase another like one.

“Instead of recognized gain on the sold property, you roll it into new property and essentially reduce your cost basis in the new property by that gain,” says Dawn Greenberg, CPA and tax principal at Toms River, N.J.-based Cowan, Gunteski & Co.

When you eventually sell the new property, you’ll recognize the originally deferred gain plus any additional accrued since you purchased the replacement property. But if you don’t need the proceeds and just want to get rid of the property, says Greenberg, a 1031 exchange could help postpone an investment tax bill. In effect, you get an interest-free loan from Uncle Sam in the amount you would have paid in taxes.

While like-kind exchanges are often used by real estate investors, the technique is available for any investment or business property. If you’re interested in a 1031 exchange, consult an expert in the area. It can get complicated and there are strict rules, such as the requirement that any swap be made by a qualified intermediary rather than by the property owner. If you make a misstep in the exchange process, it could invalidate any tax benefits.

Municipal Bonds

If you prefer more traditional investments, there are some tax shelter opportunities there, too.

“If bonds fit into your financial plan, look at municipal bonds,” says Luscombe. These instruments are issued primarily by state or local governments, or state-related organizations.

The tax benefit? Some states don’t tax interest on bonds issued by their municipalities. As for the IRS, municipal bond income is not taxed at the federal level.

Business Tax Breaks

Business owners, including those who set up a sideline to supplement full-time wage income, can use several IRS-approved tax shelters.

Section 179 of the tax code allows you to deduct substantial costs of business property purchases in the tax year they are made. Without this provision, the costs of items such as furniture and other equipment special to your business would have to be recovered through depreciation over several years, says Scharin.

If you operate your business out of your home, you could be entitled to a home office deduction. With this tax break, you can convert some of the maintenance cost of your home to tax deductions.

“The insurance on your house or if you need a new roof, a percentage of these costs would be deductible,” says Scharin. The amount is figured using the percentage of space that your home office represents.

A business owner also can hire the spouse and kids as long as they do real work for the company. “That gets additional income to them and provides deductions to the business,” says Luscombe.

Workplace Benefits

You don’t have to be an entrepreneur to shelter income from Uncle Sam.

Greenberg says employees should take advantage of workplace benefits. Flexible spending accounts, to help pay child care costs and out-of-pocket medical expenses, allow workers to contribute money to the accounts before payroll taxes are figured. “You never pay taxes on that money,” says Greenberg.

That same pretax break is available for workplace 401(k) retirement plans.

Retirement Plans

Other outside-the-office retirement savings also can help you shelter income. Some traditional IRA owners might get an immediate tax deduction on their returns, along with a deferral of taxes on the IRA earnings.

A Roth IRA is great way for some folks to avoid tax. You don’t get any deduction for Roth contributions, but when you eventually take money out of the account, it will be tax-free.

And entrepreneurs have a variety of retirement plans — SEP and SIMPLE IRAs, Keoghs, Solo 401(k)s — that can help reduce their taxable business income as well as help prepare for eventual life after work.

With each of these various tax shelters, from your home to investments to your job to retirement savings, the IRS offers ways to hang onto more of your money. And when the tax man says it’s OK to keep money out of his hands, who’s going to argue?

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