Ask the Dollar Diva By Dorothy Rosen • Bankrate.com

The DINK mission

Dear Dollar Diva,
My wife and I were married in September 1999. We have no kids and no house. I'm afraid that the taxes will kill us. She claims her mom as a dependent. Should I claim her as well? How can we reduce our taxes? Should we file jointly?

Most married couples do best filing Married Filing Joint. As far as claiming your wife's mother, there are five tests that a person must meet in order to qualify as a dependent: relationship, joint return, citizenship, income and support. If she passed all the tests last year, there's a good chance she'll pass them all this year, and you'll be able to claim her as a dependent.

See the IRS Publication 501, Exemptions, Standard Deduction, and Filing Information, for more details on these tests.

Reducing your taxes

The good news about being a DINK (double income, no kids) is that by pooling your resources the living expenses for the two of you can be considerably less than the sum of your living expenses when you were single. The bad news is that when the marriage penalty rears its ugly head the tax bite can be fierce.

So you have a twofold mission: to shelter income from taxes and to use your DINK status to accumulate some wealth. The Diva suggests the following:

• Pay off all your credit cards, and never, ever carry a credit card balance again.
• Make maximum contributions to every deferred compensation plan available to you, such as 401(k), 403(b), IRAs and Keogh.
• For investments outside the shelter of a retirement plan:
• Buy the stocks of well-managed, solid companies and hold them. There's no tax due until you sell.
• Look for tax-managed mutual funds that will not hit you with large, taxable dividend and capital gains distributions at the end of the year.
• Buy a home -- you'll get the tax breaks and a hedge against inflation.
• Invest in yourself with education and skills training. Follow your bliss on this one. Wealth comes in many guises.

DOROTHY ROSEN has a master's degree in finance, with a specialization in accounting, from the Kellogg Graduate School at Northwestern University in Evanston, Ill. Rosen has more than 15 years of experience in the financial arena, serving in Illinois and Florida as a certified public accountant, financial consultant, expert witness and educator. She is owner of Dorothy Rosen, CPA, a public accounting firm that serves individuals and small businesses.