1. Meet with your financial advisor or tax professional. They have a much better feel for your personal situation and can provide strategies for your circumstances. The following ideas, while they can provide significant tax benefits, may or may not make sense in your personal situation. There are so many variables to address that not all of the details can be covered in this article so remember to please consult a professional to maximize these ideas.
2. Be charitable. Make a donation to your favorite charity by December 31. If your charity accepts credit cards, you could charge your donation before year-end to have it count for this year’s tax return.
3. Bunch your itemized deductions. If you are close to being able to “itemize deductions,” but not quite yet over the standard deduction, you might want to make extra charitable deductions, pay state or property taxes, pay January’s mortgage payment or medical expenses in December 2010 to take advantage of tax benefits without doing a whole lot of things differently, just timing your deductions to maximize your tax benefits.
4. Buy something. If you were planning on it anyway, make your purchase in December 2010 instead of January 2011. If you own a business, you should think about purchasing equipment or taking an extra trip to the office supply store to get more deductions this year.
5. Take some gains. Currently, long-term capital gains rates are at historically low rates of zero to 15 percent. It is likely these rates will go up in the future, so it might be beneficial to take advantage of what is currently available.
These are simply brief overviews of some of the tax items that you should not only be thinking about, but also trying to take advantage of. There are many favorable tax provisions that will only be in place for a short while. Make sure to call your financial advisor.