The year is rapidly drawing to a close, and that means it’s time to really think about what additional breaks you might be eligible for right now. If you are concerned about reducing your tax liability for this year, it’s a good time to see what you qualify for. The good news is that there is still time to qualify for a number of tax breaks in 2010. Here are some of the tax moves you can still make:
Hybrid Car Purchase
A tax credit passed in 2006 for the purchase of hybrid vehicles is still in effect — but it will end on December 31, 2010. If you purchase certain hybrids, you could be eligible for a tax credit. There are stipulations, though. The tax credit is only available on the first 60,000 models sold by the manufacturer. Some manufacturers have sold more than 60,000 units of some hybrid models. However, there are still some hybrids that haven’t sold out. FuelEconomy.gov has a page that shows you which models are still eligible for tax credits if you buy before the end of the year.
Green Home Improvements
If you make certain types of green home improvements, you can take advantage of tax credits. There is one credit, for home use improvements, that result in a credit amounting to 30% of the cost and the installation — up to $1,500. For big alternative energy projects, like installing wind, solar or geothermal systems, you can get 30% of the cost and the installation, with no caps. Read more about it in our post on the energy efficient home improvement tax credits.
If you haven’t contributed your maximum to a 401K or a Traditional IRA, now is a great time to put a little more toward your nest egg. You can even open a qualified retirement account if you don’t have one. Your contribution to a 401(k), 403(b) or Traditional IRA is tax-deductible, lowering your taxable income. If you want to wait until after the new year for your IRA contributions, that’s okay. While 401(k) and 403(b) contributions have to be in by December 31, 2010, you have until April 15, 2011 to make contributions to your IRA for the 2010 tax year. Just make sure you specify which year your contributions after the new year are meant to count in 2010.
If you itemize, you can get a little more in terms of deductions if you make a charitable donation. This can include items in good condition. Make sure you get a receipt for any donation you make (including one for the market value of items donated). You can also donate stock to charity. If the stock has appreciated in value, you get to donate without having to pay taxes on the capital gains, and you can deduct the entire current value of the stock.
Other Tax Breaks
There are a number of other deductions you can take,depending on your circumstances, and eligibility. Some of the possibilities include:
- Mileage traveled for business purposes.
- Non-reimbursed medical expenses amounting to a yearly total of at least 7.5% of your AGI.
- Various business deductions.
- Moving expenses for location changes of at least 50 miles due to work.
- Education credits: American Opportunity and Lifetime Learning.
Make sure you consult with a tax professional and/or IRS.gov before taking an tax breaks to ensure that you are eligible.
It’s such a shame that the tax breaks for the hybrids are ending in a couple weeks.
Investor Junkie says
I disagree. I would rather have the free market decide than some government subsidy. In many cases owning a hybrid doesn’t make economic sense unless gas is $7/gallon or higher.
I hear what you’re saying but don’t the major oil companies (and car companies for tat matter) get a lot of government help? It’s not exactly a free market.
Investor Junkie says
You are correct govt should be involved in any sectors mentioned.
So do you believe the market has been free as far vehicles?
Perhaps adding a subsidy isn’t quite the answer, but at least it provides an incentive for car manufacturers to consider putting money into alternative fuel vehicles.
Investor Junkie says
No I don’t think it’s a free market, maybe we were in the early 60’s before CAFE standards.
Plug-in electric car aren’t as green as people think. The electric usually comes from coal. At least IMHO we should be focusing on independence than being green for the environment.
IRS Hitman says
Excellent guide. I’m going to link this to the next post I’m working on, regarding “Year End Tax Tips”.
Don’t forget pre-paying real estate taxes and deferring income if you think you will be in a lower tax racket next year.
“tax racket?”, is that a Freudian slip of sorts? Haha.
Good advice on prepaying.
Sandy @ yesiamcheap says
One thing that I did was have some of next year’s cost for my investment property billed now so that I can pay it now and take advantage of it. I did that with the exterminator and I renewed the insurance on the home early. I don’t know if anyone else has investment property but that’s one way I am trying to offset my tax costs.
I didn’t realize you could get a tax write off for buying a green car. Is this part of “cash for clunkers”?
I think this was originally before cash for clunkers.
Thanks for the breakdown and reminding me to contribute more to my IRA and 401K.
You’re welcome! It’s a reminder for me too.