For many, tax-advantaged investing is an excellent way to reduce taxes. Although many traditional tax-advantaged strategies have been eliminated, alternatives still exist to help reduce your taxes.

Tax Benefits of forming a Partnership

There are different options to consider if you're interested in forming a partnership.

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Real Estate Partnerships include different options. Two of the most common are low-income housing and historic rehabilitation. The federal government grants tax credits to those who construct or rehabilitate low-income housing or who invest in the rehabilitation or preservation of historic structures. Participating in a real estate partnership has many advantages. Besides being considered socially responsible investments, these partnerships may provide opportunities for tax-advantaged income and long-term capital appreciation. Tax credits generated by these partnerships can be used to offset your income tax liability on a dollar-for-dollar basis. This can make them much more valuable than tax deductions, which help reduce your taxable income — not the tax you pay. These credits are subject to certain limitations, and the rehabilitation tax credit is phased out for taxpayers with incomes greater than $200,000.

Oil and Gas Partnerships can provide income that is sheltered from taxes by tax deductions taken at the partnership level. These include deductions for intangible drilling costs, depreciation, and depletion. These write-offs shelter partnership income from taxes so more income is passed on to you.The deductions may be limited; check with a tax advisor to see if you could benefit from oil and gas partnerships.

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Consider Minimum Tax and other risks carefully

As with all investment, these carry risks. Because of the special risks (such as illiquidity) associated with these types of investments, most partnerships require that investors meet income and net worth requirements. Known as "suitability requirements," these standards are designed to ensure that the investor has the financial resources to withstand the potential risk of the partnership. These requirements are set forth in the prospectus, which should be read carefully before investing. There are no assurances that the stated investment objectives will be reached. At redemption the investor may receive less than the original investment. The alternative minimum tax is another concern. Make sure you consult an advisor to evaluate your exposure to the AMT.

As long as they are suitable, these tax-advantaged investing strategies can be one way to reduce your income taxes. A financial professional can help you determine whether this would be an appropriate strategy for you.