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Miscellaneous See other Miscellaneous Articles Title: Savings via sweat equity, IRA Sweat Equity My backyard has been soggy since I bought the place six years ago. Not a swamp, but soggy — still spongy a week after it rains. Last year, it was made worse by my neighbor's construction of a patio. He tied his downspouts and sump pump into pipes that ran under the patio and empty a couple feet from my yard. To keep from having to mop my floors every day, I've had to wipe my dog's paws off every time he comes inside... not to mention that a soggy backyard doesn't add to the ambiance of horseshoes or crab feasts. Plus it's annoying. The time I spent thinking about my wet backyard was detracting from my quality of life. But how do you fix a problem like that? Most people would just put up with it, either not having the funds or ambition to tackle it. I found out fixing the issue involved hooking up to all my neighbor's pipes and burying them in a series of French drains that empty into large underground holes filled with stone. Two estimates I got for the project were both over $5,000. This past weekend, I did it myself for $1,248.54. I rented a trencher, an auger, and a skid loader with a bucket. (Even with $4.00 gas, my 12.8 MPG truck is saving me money!) I got two scoops of gravel in the back of my dad's larger F-250. I had 10 yards of topsoil delivered. I dug the trenches in the soggiest areas, which I had previously marked by standing in my backyard during a rainstorm. Then I hooked into my neighbor's pipes and buried them in the trenches, backfilled them with gravel, regraded with topsoil, and seeded. My dad and I worked from sunup to sundown Saturday and Sunday. When it was over, we were sore and had a few blisters... But I saved over $3,700 and got that rare sense of accomplishment that only hard work can deliver. A Florida Keys fishing trip costs about that much... Your Own Tea Party Toward the end of last year, I realized my capital gains could leave me with a sizable tax bill come this time of year. No one likes paying taxes. No one likes where their tax dollars go. That's not changing. But you can change and hedge against how much you owe. So I started an additional IRA that I'll treat as non-deductible, funded with the 2011 maximum of $5,000. Non-deductible means you already have an IRA and your income exceeds the limit for which contributions can be deducted. But while the contributions — or basis — aren't tax-free initially, they are when you withdraw funds. So if I double the money with short-term gains in that IRA from $5,000 to $10,000, I'll only pay tax on the $5,000 gain when I withdraw the funds. If it were in a standard taxable account (Scottrade, E*Trade, etc.), the full $10,000 would be taxed at the marginal rate. So I'm saving future tax by spending the time and money to open another IRA now. It's a bit more complicated than getting the government to pay for your food and health care so you can afford a 50” LED TV, but that's a good problem to have. Post Comment Private Reply Ignore Thread Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: Tatarewicz (#0)
Assuming the laws don't change between now and then.
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