Tax Breaks You Can Still Get in 2010 to Reduce Your Taxable Income

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.

Retirement Account

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.

Charitable Donations

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.