The Internal Revenue Service is reminding taxpayers they have about two weeks left to make their final financial moves for the 2010 tax year. Taxpayers may find tax planning done now may well save time, and money, later. Several key points to consider:
• Charitable Contributions - Make 2010 deductible charitable contributions no later than Dec. 31. If the taxpayer's goal is a legitimate tax deduction, give to a qualified public charity and keep a paper trail. Clothing and household items must generally be in good used condition or better to be deductible. Donations charged to a credit card by Dec. 31 are deductible for 2010 even if the bill is paid in 2011. Taxpayers must be itemizing deductions on a Schedule A in order to benefit.
• Winterize Now, Save on Taxes Later - The Energy Tax Credit provisions from the 2009 Recovery Act are set to expire at year's end. Two credits provide tax incentives for individuals to invest in energy-efficient products. Up to $1,500 can be claimed in 2010 for qualified home improvements such as adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems. Also, taxpayers can take a tax credit equal to 30 percent of the cost for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.
• Sell the Losers - Check investments and consider a portfolio adjustment. Up to $3,000 can be deducted in capital losses each year.
• Retirement Account Contributions- The maximum 2010 IRA contribution is $5,000 ($6,000 if age 50 or over). Eligible taxpayers can also take a tax deduction for making an IRA contribution. The Retirement Savings Contribution Credit or "Saver's Credit" is also available to taxpayers who contribute to a retirement plan and whose income is generally less than $55,500. This under-the-radar tax credit may be worth up to $2,000 for eligible taxpayers.
• Required Minimum Distributions -. Taxpayers 70.5 or older are required to take 2010 required minimum distributions from IRAs before Jan. 1, 2011. This requirement was suspended in 2009 but for 2010 they must be taken.
• Consider a Roth IRA Conversion - Taxpayers may convert other IRAs to a Roth IRA in 2010 regardless of their income. Those who convert before Dec. 31, get two choices to pay the taxes due from the conversion: Pay in entirety when filing their tax year 2010 return next year, or divide income from the conversion between 2011 and 2012.
• Gift Giving - Taxpayers can give a gift worth as much as $13,000 in cash or property in 2010 to another person without having to file a gift tax return. Gifts to individuals are not deductible.
Save Receipts and Paperwork -Accurate recordkeeping is a must and also provides a good reminder.
For more year-end tax information and to access all IRS forms and publications, visit the IRS website at http://www.irs.gov
