Last Minute Tax Deductions

With so much controversy buzzing in Congress over taxes this year, it shouldn’t surprise anyone that there are a lot of headaches in store for those making higher salaries and bringing in larger incomes in the U.S. There are some people doing everything they can to lower their tax bill for 2010 while pushing offer deductions for the coming tax season in the hope they may go farther in 2011 should the tax rates increase.

Still, some are looking for those last minute tax deductions in order to get the best possible tax bill for the 2010. In fact for some families, many of whom are struggling in the weak economy, want to take advantage of these deductions to lighten the load or use it to open new doors of opportunity.

Here’s a good example of last minute deductions:

If you increase 401(k) contributions during the last few pay periods, you’ll lower your taxable income and possibly qualify you for additional tax breaks based on certain income limits.

No matter what your income level may be you can convert a traditional retirement account to a Roth IRA to qualify for certain deductions, provided it is done before December 31st. This deducts from the bill by dividing it between the 2011 and 2012 tax returns. It’s a big area of savings. Plus, the conversion will not increase your 2010 income levels.

There are some addition tax reductions that will expire at the end of 2010. As such, they’re time sensitive and you need to jump on them quickly. For instance, you could sell off the long-term capital gains without paying a dime in taxes or you could install some energy-efficient windows or doors to qualify for the home-energy tax credit,

One of the big issues getting attention by the media is the upcoming lame-duck session of Congress in December. A number of tax breaks that expired are on the table for reinstatement. Also, the big exemption dealing with the alternative minimum tax remains a crucial item. This deduction would keep millions of middle class Americans form paying the tax level created to tax the wealthy.

For college students there is the American Opportunity Credit which also expires on December 31st. This credit would all those students with incomes up to $80,000 ($160, for married couples) who are paying $4,000 in tuition during 2010 to receive a tax credit totally $2,500. Also, you can use it to pay future tuition for the following year.

There may be other last minute tax deductions that might be available throughout channels. It may be worth a little of your time and effort to do some additional research to track a few more down so you can lower what you’ll have to pay in taxes for the year. Imagine some of the benefits this provides to your family.

No one want to face a heavy tax burden without considering the way to avoid some of it if they can.

Creative Commons License photo credit: Digitalnative

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