5 Tax Breaks for Year End Tax Planning in 2010

by Miranda Marquit · 4 comments

One of the best things you can do for your tax efficiency is to take advantage of tax breaks at the end of the year. Before 2010 closes out, it is a good idea to consider your eligibility for the following five tax breaks:

1. Green Home Improvement Credit

You can get a tax credit for making green home improvements through the end of this year. You can get a 30% tax credit, up to $1,500, for making small energy efficiency upgrades such as adding insulation, replacing windows, getting duct seals and adding energy efficient doors. If you make a big upgrade, such as solar panels or a wind turbine, you can get a 30% tax credit — no limit to how much.

You should also check with your state government, as some states have their own tax credit programs related to energy efficient home upgrades.

2. Sell Investments for Long-Term Capital Gains

If you’ve been hanging on to some investments, and you are contemplating selling them, now might be a good time. Through the end of 2010, there is no long term capital gains tax for those in the 10% and 15% tax brackets. For everyone else, capital gains top out at 15%. Next year though, capital gains tax might shoot up to as high as your marginal tax rate!

3. Put a Little More Into Your Retirement Account

If you have a traditional IRA or a regular 401k, it might be a good idea to put a little more in. The money is pre-tax, so it amounts to a tax deduction. You can get a little bigger deduction if you put in more. If you do not have a retirement account, it might be a good time to open one — and get your tax deduction. It is worth noting that contributions to most Health Savings Accounts are deductible as well.

4. Home Buyer Tax Credit

Don’t forget that the home buyer tax credit is available if you bought a home earlier this year. You can get up to $8,000 if you are a new home buyer, or $6,500 if you are an existing home owner. If you bought a home by April 30, 2010, you should be looking through your paperwork, and figuring out if you are eligible for this tax credit.

5. Charitable Giving

If you want to reduce your taxable income this year, you can give some money away to charity. This is a great way to find a tax break if you itemize. Combined with other deductions, such as mortgage interest rate, your charitable giving can be a big bonus. Consider donating money to your favorite charity. You can also donate items in good condition. Make sure you get a receipt though. You will need it in order to verify your donation.

You can also donate stock to charity. If the stock has appreciated in value, you get a tax deduction, and you won’t have to pay taxes on the gains. You can donate losing stock as well, but in those cases you are often better off simply selling the stock and getting the tax break for a losing investment, and then giving the money to charity and taking the donation deduction.

Look for Other Ways to Save

You can find other ways to save on your taxes. Look into your habits, and figure out what might be eligible for a tax break. You can also consult with a knowledgeable account or tax attorney who can help you make a plan to increase your tax efficiency. Don’t wait until you’re rushed to fill out your tax return. Instead, look ahead, and plan for deductions and credits before the year ends.

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  • Small Business Tax Professional says:

    The best year end tax planning advice is to see a professional tax planner. There’s no way you can keep up with the ever-changing tax law in order to reduce your taxes as low as possible. A professional tax planner will be able to help you figure out which strategies will work for you and how much you need to do.

  • papa johns says:

    thanks man, these informations have been provided at a vital time.

  • vered says:

    Good list, good timing. Thanks.

  • Sydney says:

    Actually, there is virtually no danger capital gains rates will go as high as your marginal rate. The expiration of the Bush tax cuts will revert the cap gains rate to 20%. There is no legislation that does not support a preferential capital gains rate. However, Obama’s plan is to keep the rate lower than 20% for those under $250k–but we’ll see what really happens. The only point I wanted to make was that no one is lobbying for a total elimination of the preferential capital gains rate. It’s just a question of whether you will begin paying 20% next year or whether a bill will be passed to keep you at 15% (or zero for those lower brackets–by the way, this reverts to 5% upon expiration.)

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