Last Minute Tax Tips Before Midnight

While the tax debate has recently been heated for 2011 and future years

, the more immediate challenge for taxpayers is finding ways to reduce their tax bill for 2010. Fortunately, there are still some smart moves you can make now to potentially reduce your tax bill come April 15th. Following these tips before the New Year arrives can boost your chances of maximizing your refund at tax time:

Donate to charity: The United States is blessed with many worthy charities, and year-end giving is critical for these organizations. Charitable contributions made before year's end to qualifying organizations are tax deductible. Don't forget that donated items, including clothing, furniture and toys qualify; as does mileage, if it's part of your charitable work. Make sure you keep receipts to prove the amount and date of your contribution.

Consider selling losing investments: The first $3,000 of your losses is deductible against ordinary income. Any losses in excess are carried over to 2011.

Speed up your retirement contributions: Participants in 401(k) retirement plans can contribute $16,500 in 2010. If you aren't going to reach that limit and can afford to, additional contributions will save you at tax time. Participants 50 years and older can contribute up to an additional $5,500. Investing in your retirement plan now allows you to grow your retirement nest egg tax free and get tax savings now.

Prepay mortgage and property tax expenses: Paying your January 2011 mortgage bill by December 31 gives you an extra month's worth of mortgage interest to deduct in your 2010 tax return. The same applies to property taxes if you normally pay those in January.

State income tax: Are you going to owe state taxes for 2010 in April 2011? Consider paying those taxes prior to December 31 in order to deduct them on your 2010 tax return.

Review Medical Expenses: You can deduct out of pocket medical expenses, as long as they add up to 7.5% or more of your adjusted gross income. Because of this limitation, it may be beneficial to bunch medical expenses into one year in order to reach this threshold.

Using any or all of these simple tips can provide the average taxpayer with real savings on their 2010 tax bill. Despite the temptation to put off your tax matters until W2s arrive in the mail, taking some time now, before the holidays, can provide taxpayers with big savings.

by: Nathan Randall

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