photo source: Massachusetts Real Estate Voice

While the deadline to file your taxes is April 15, 2010 you need to act now and before the end of the year to earn key tax deductions. Here is the checklist that I shared on the evening news broadcast at WPIX tonight. 

Donate Up!

Many charitable donations are tax-deductible and this may be the most advantageous year for taxpayers to be charitable.  President Obama is proposing to further cap deductions for charitable contributions. The IRS considers cash, electronics, cars, jewelry, paintings, clothes, even property as qualifying donations.  Any donation above $250 in value requires an appraisal from the charity establishing that you, indeed, donated that market value. With cash donations – there’s a dollar limit. Cash contributions can’t surpass 50% of AGI (adjusted gross income). Property donations can’t exceed 30% of AGI.  

Aim for a Medical Deduction

This is a longshot for a lot of taxpayers but it’s something to keep in mind as the year wraps up if you’ve had or are planning any expensive medical procedures like LASIK eye surgery or major dental work. The IRS lets taxpayers deduct most medical and dental expenses (including health-insurance premiums) if they surpass 7.5% of the person’s adjusted gross income. (So if you earn AGI $50,000 then that’s $3,750). That’s a high bar but if you are planning to get elective procedures done you may want to schedule them in the next month to boost your chances of qualifying for this deduction.

Boost Your Investment Losses

If you lost some money in the stock market this year – and chances are you did – know that you may be able to write-off your investment losses if your portfolio ends up net negative for the year.  You have to pay taxes on any capital gains but if you sold a stock, bond, or mutual fund in a taxable account at a loss, you can use the losses to offset your gains. If you have more losses than gains then the IRS lets you deduct up to $3,000 in remaining losses from your income. The excess carries forward and gets used in future years. Advice: Be strategic. If you’re holding onto some beaten-down stocks you’ve been thinking of dumping, do it before Dec 31. This way you can help offset any of your capital gains, possibly end up with more losses than gains and deduct your losses. 

Max Out Your Retirement Contributions

Your 401K and IRA have contribution limits that carry tax-deductible benefits. These benefits expire at year-end and start again in the following year. So act now. Your 401(k) tax-deductible contribution caps at $16,500 ($22,000 if you’re over 50).  Your IRA caps at $5,000 ($6,000 if you’re over 50).

Go Green

The federal stimulus plan provides tax credits to individuals and business owners if you make or use energy-efficient products this year and next.  Examples include: energy-efficient appliances, windows, water heaters, solar-energy systems, etc. You can receive credits of 30% of the cost up to $1,500 in total. Also hybrid car buyers can earn tax credits of up to $7,500. You can go to energystar.gov for more information on green tax breaks.

House Hunt

Now’s a smart time to start looking for a home and earn a possible tax credit, thanks to new extended provisions to the home-buying federal tax credit. 

Know that if you buy a home this year and it was the first time in five years you possibly qualify for the first-time home buyers tax credit of up to $8,000. There are income restrictions and the home can not be more than $800,000. For those who’ve yet to buy a new home, no worries: The tax credit deadline has been extended through April 30, 2010 to get a sale in contract. You need to close the sale by June 30, 2010.  But you don’t have to wait until the 2010 filing season to earn the credit. You can claim it on your 2009 federal tax return and earn the deduction for THIS tax-filing season.

Current homeowners have a new incentive now to buy a new house, as well. There’s a credit of up to $6,500 for buying a new home, provided that you lived in your primary residence for five consecutive years out of the last eight and that this new home becomes your primary residence. This credit expires next June.