Tuesday, December 14, 2010

End of the Year Tax Planning

With only 2 1/2 weeks of the year left, are there ways you can reduce your 2010 tax bill?

The first question is, will you itemize deductions or use the standard deduction? If you don't itemize, last minute tax strategies are limited. So many of these strategies only apply to itemizers. (The catch: unless you pay home mortgage interest, it usually doesn't pay to itemize.)

Strategy 1: make additional charitable contributions before December 31. Cash contributions are the first thing that comes to mind, but this is a good time to make non-cash contributions, as well. Go through your closets and food pantry to see if you have food or used items to donate.

Remember: the gift must be to a charitable organization recognized by the IRS. Gifts to individuals do not qualify.

You should get a receipt from the organization with a description of the donated property, the date, and the name and address of the charity. Vehicles and items over $500 have additional documentation requirements.

Only items in "good used condition or better" qualify for deduction.

Mileage doing charitable work or delivering charitable gifts is deductible. Keep good records.