taxesSometime this month -- sooner, rather than later -- you need to take a break from all of the holiday hoopla and focus on maximizing your tax position for 2010. Making just a few small moves before Dec. 31 could benefit you big time come April 15. It won't take long, and it will be relatively painless, I promise.

1. Max Out Your Retirement Account

Or at least get as close as you can. You can stash $16,500 in your 401(k) this year, and $5,000 in your IRA (if you're 50 or older, you get an extra $5,500 for the 401(k) and an extra $1,000 for the IRA). The 401(k) has to be funded by Dec. 31, but you have until April 15 of next year to fund your IRA. There is a lot of uncertainty about tax rates -- most people think rates will go up over the next few years-- but saving for retirement is one move that always makes sense.

2. Give to Charity

There are countless coat, food, and toy drives going on right now. I saw Salvation Army bell ringers out for the first time this weekend. If you have some cash to spare, or a closet to clean out, now is the time to do it if you want to take a deduction this year. Just be sure to get a receipt, and make sure it specifies the who, what and when, says Bob Meighan, a CPA and VP at TurboTax (INTU). "You need a record of which charity you gave to, what the date was, and if you gave items, a description of what they were." There are some other rules you need to know, as well: If you donate an item worth more than $5,000, you need to get an appraisal. And if all of your non-cash contributions total more than $500, you have to attach IRS Form 8283 to your return.

What you're deducting is the fair market value of the item -- in other words, what you would get if you sold it. If you're not sure what your donation is worth, it pays to run some numbers. The Salvation Army has a good list of the fair market value of common items, or you can use a program like TurboTax's ItsDeductible. "Surprisingly, most people underestimate the value of these items, and take a smaller deduction than what they're entitled to. You want to make sure you get the maximum deductible possible," says Meighan

Finally, if you don't have money or items to donate this year, volunteer your time. Charities tend to need a bit more help during the holidays, and you can deduct mileage if you drive back and forth. This year, the rate is set at 14 cents a mile. It doesn't seem like much, but ask anyone who drives a lot for work and gets reimbursed -- it adds up fast.

3. Look for Credits

Deductions aren't much help if you don't itemize. But credits are: A credit actually lowers your tax bill dollar for dollar, while a deduction lowers your taxable income. One thing you can do now, says Meighan, is take advantage of energy credits, some of which are set to expire at the end of this year. If you make energy-efficient home improvements -- things like new windows and doors, insulation, metal and asphalt roofs or central air conditioners -- on your principal residence, you can get a tax credit of up to 30% of the total amount spent on the home, up to $1,500. Note that these things must be "placed in service" before December 31 -- not just purchased, but installed and available for use.

4. Sell Losing Stocks

Pushing your losers out the door allows you to claim a loss of up to $3,000 in any year, according to Meighan. If you have more than that, you can take $3,000 this year, and roll any excess into next year's return.

5. Plan Ahead

If you're a higher earner -- with an income over $250,000 for families or $200,000 if you're single -- you should have your eye on Congress, says Meighan, and you should already be positioning yourself to make a move if they decide to act prior to the end of the year. That means identifying ways to accelerate income into 2010 and defer deductions into 2011. If you're not sure where you stand, I'd meet with an accountant now to get a grasp on what you can do to improve your situation, if the need arises.

Increase your money and finance knowledge from home

Timing Your Spending

How to pay less by changing when you purchase.

View Course »

How much house can I afford

Home buying 101, evaluating one of your most important financial decisions.

View Course »

Add a Comment

*0 / 3000 Character Maximum

14 Comments

Filter by:
Harry and Morgan

I feel that if Obama would have listened to Emanual Rahm, his main advisor, he would have really 'beaten up' on Cheney,Bush, Rove and Rumsfield by pointing out that Cheney and Rummy were in charge of the Vietnam War which was a moneymaker for War Busines CEO's. And now it was easy to see that the Iraq war was a complete fake...making war on a country that had nothing to do with 9ll. Rahm would have those 'traitors to the country' quaking in their boots due to possible criminal charges. Then the well-bribed congressmen would have gone along with the ending of their ill-deserved tax cuts knowing they are on the list of money seeking backstabbers who steal money out of our Treasury to 'fund' the War. Actually, they are enriching all our Weapons Makers...Billionaires.

January 05 2011 at 9:07 PM Report abuse rate up rate down Reply
cnsrvtvj

They talked about this at donsmithshow.com this weekend. They covered it pretty good.

December 06 2010 at 10:50 PM Report abuse +1 rate up rate down Reply
havecash

Dems didn't cave into anything...they wanted the 2 million Americans to continue receiving the unemployment benefits that the Repukes wanted to take away from them. Bravo to Obama for considering those people when all the Repukes cared about was maintaining the tax benefits for those who make more than $250,000 per year. I make more than $250,000 per year. I really don't care that I would have to pay an additional $5000 in taxes. But think about those families who would have lost unemployment benefits...with children who need to be fed and clothed. Repukes: they are shameful people and always will be shameful people.

December 06 2010 at 9:20 PM Report abuse -1 rate up rate down Reply
crimson00king

Out right shameful behavior by the GOP to use extortion to get tax breaks for the rich. Contact your senators congressmen and the White House and tell them what you think about extending tax breaks for the rich 2 percent of America. Pitiful that the Democrats caved in on every issue the GOP wants.

December 06 2010 at 4:32 PM Report abuse -4 rate up rate down Reply
jokesl3

Giving to charity might help you if you are borderline on a tax bracket Obama wants to raise your taxes if you make over 250k. What if you make 250,005 dollars? Of couse since the thieves in charge can't come to any kind of decision, it's hard to know what to do at this point.

December 06 2010 at 3:05 PM Report abuse -2 rate up rate down Reply
1 reply to jokesl3's comment
sahmgr

Those terribly poor couples making betweeon $250,001 and $250,100 would pay an additional $2 tax if the so-called "Bush Era" tax cuts were extended. Gosh, that's rough.

December 06 2010 at 9:21 PM Report abuse +1 rate up rate down Reply
Jetncat

Here's another tip: Get rid of the socialist in office who want to tax you so they can spend your money the way they see fit. It's never enough for big Gov't

December 06 2010 at 12:27 PM Report abuse +14 rate up rate down Reply
Jetncat

Here's another tip: Get rid of the socialist in office who want to tax you so they can spend your money the way they see fit. It's never enough for big Gov't

December 06 2010 at 12:27 PM Report abuse +9 rate up rate down Reply
rgreen7507

These 5 "tips" may save you tax dollars but don't necessarily save you "money". Like giving to charities for instance. If you need money, don't give it to charity. Your better off dollar for dollar paying the tax on it and keeping the rest. Give a $100 to charity you might save $20 on your taxes. Keep the $100 and pay the $20. Now you have the $80 instead of some charity that may or may not do anyone any good except the administrators of the charity. Just think it through before applying these wonderful ideas. Saving tax dollars does not mean you are using your money to the best advantage for "you".

December 05 2010 at 10:43 PM Report abuse +2 rate up rate down Reply
rmart86051

doesn't the alternative minimum tax undo any of your above suggestions?

December 05 2010 at 8:40 PM Report abuse +1 rate up rate down Reply
dterraman

gov man has a voracious appetite....

December 05 2010 at 6:53 PM Report abuse +5 rate up rate down Reply