13 Ways to Maximize Your Tax Deductions Before the End of the Year
Dec 20th 2010 11:00AM
Updated Dec 28th 2010 12:08PM
About two out of every three taxpayers will opt for the standard deduction. That means that tens of millions of taxpayers will choose to itemize. If you're one of those taxpayers filing a Schedule A this year, here's a quick checklist of ways to boost those deductions before December 31:
- Buy Those Prescription Glasses You've Been Putting Off. The cost of items such as prescription eyeglasses or contact lenses are deductible medical expenses. If you pay for them by the end of 2010, you can deduct them on your taxes.
- Go To The Dentist. Allowable medical expenses also include fees paid to doctors. Again, be sure and pay by the end of the year.
- Prepay Your Taxes. You can deduct the payment of state, local and foreign income taxes, real estate taxes, personal property taxes, state and local sales taxes, and qualified motor vehicle taxes on your federal income tax return. If you're going to have to pay it in 2011 anyway, you can pay a little early and take the deduction for 2010.
- Pay Your Back Taxes. Any prior year's state or local income tax you paid during the year would be deductible on your federal income taxes for 2010. Why not get those old bills out of the way and start 2011 with a clean slate?
- Pay a Little Bit Extra On Your Mortgage. Mortgage interest payments (but not principal) are generally deductible. Paying it off a little faster can, in some cases, actually reduce the overall cost of your mortgage (read the fine print to be sure) and accelerates your tax deduction.
- Make an Extra Student Loan Payment. Same principal as the mortgage interest payments: You might reduce the cost of your loans if you make extra payments, and you can deduct the student loan payments on your income taxes.
- Donate to Charity. Donations made by year-end may be deductible on your 2010 taxes.
- Pay for Tax Advice. Legal fees related to producing or collecting taxable income or getting tax advice are tax deductible -- and year-end is the best time to do tax planning.
- Go to Vegas. Gambling winnings are taxable to you as income but gambling losses are deductible on Schedule A to the extent that you have income. So go ahead, roll the dice.
- Pay your Professional Dues. If you're like me, you get reminders practically all year long about joining various professional organizations. If you re-up by year-end, the reminders will stop and you can take the deduction.
- Pay Your Tuition in Advance. Fees for work-related education are deductible. If you're starting school in January, consider paying tuition in December to take advantage of the deduction a bit early.
- Make a Payment on Your Professional Insurance. Lawyers, doctors and other professionals generally maintain malpractice insurance -- and the fees can be quite hefty. Making a payment by year-end means you can lessen the pain by claiming a deduction for 2010.
- Send Out That Resume. Job search expenses may be deductible. And what better way to start the new year than with a lead on a new job?