You just filed your 2009 tax return a couple months ago. For this reason, you probably want to take some time off and forget about the IRS for a while. Even though this is tempting, now is the time that you really have to put your mind to work. If you want to save on your 2010 taxes, you cannot afford to put this off. As soon as 2011 arrives, most of your opportunities to save will be long gone. Here are five things you can do now to save on taxes for next year:
1. Do you have an IRA? If so, you need to put money into it throughout the year. While this means less money to live on, you will be glad you did it when filing your 2010 tax return as well as when it comes time to retire. IRA deductions are deductible above the line. This means that you do not have to itemize in order to take advantage. Even though you have until April 15, 2011 to contribute to your IRA, you don’t want to put this off.
2. Make charitable contributions. The more money you give to charity, the more money you can deduct. This is something you have to start thinking about now. If this is not on your to-do list, there is a good chance that it will be put on the back burner and eventually overlooked. It’s also a great way to give back to the community.
Tip: You must make your donation by December 31, 2010. Also, don’t forget to obtain a receipt. You will need this if the IRS audits you.
3. Take advantage of “Go Green” tax credits. If you are going to be making improvements to your home, you might as well save some money on taxes along the way. By installing energy efficient items, including windows, furnaces, and air conditioners, you may qualify for a credit of up to 30% of the cost.
Tip: To learn more about this, visit the Energy Star web site.
4. Get help. Some people do not call their tax professional until a couple months before their return is due, and this is a big mistake. By staying in touch throughout the year you can get advice on how to save money while also ensuring that you are more organized. At the very least, buy tax software that you can use on a regular basis. You may see this as an expense, but in the long run it will save you a lot of money.
5. Track the cost of finding a new job. If you are among the millions of Americans out of work, there is a good chance that you have been spending a lot of money searching for a new position. You have the right to deduct expenses including travel, lodging, and the cost of food.
Tip: These items are only deductible if the cost exceeds 2% of your adjusted gross income. Check with your tax professional before you claim this deduction.
No matter who you are, you should be able to take advantage of one or more of the above methods of saving. Tax planning is a year-round practice, not just in April! You’ll be glad come tax filing day if you’ve worked hard to minimize your taxes throughout the year.
Do you have any other good tax-saving tips?
(photo credit: KOMUnews)