With April 15 just round the corner, you will be thinking about paying off your taxes for the previous year and getting on with your life. However, this is the correct time to start your tax planning strategies for 2010 so that you can lower your tax liabilities this year.
Here are some steps that you can take reduce your taxes this year.
o The real estate market is facing a slump and home prices are at an all time low. At least they are lower than what the prices were a few years ago. If you have not owned a home for the last three years, you will be considered a first time home buyer. This entitles you to claim tax credit of up to $8,000. While home owners who already have a home and have lived in it for around 5 years can claim up to $6,500. First time home buyers need to sign a contract before April 30, 2010 and then close the deal latest by June 30, 2010 in order to claim the tax credit.
o This is the best time to covert your traditional IRA to a Roth. In 2010, anyone who has a traditional IRA can covert the account to a Roth retirement account. The income limit for Roth has been removed. However, you will have to pay taxes on the untaxed amount. The good news is that you can pay half of the conversion cost in the 2011 taxes and the other half in the 2012 taxes.
o If you make your home more energy efficient, you can get some of the costs for converting returned in the form of energy tax credits. You can get up to 30 percent of the first $5,000 spent on making your home energy efficient. If you install a solar heating system in your home, you can get more tax credits. This is most probably the last year when the government will allow this credit. So, this is the best time to benefit from it.
o You can get tax credit for a hybrid car even in 2010. The only catch is that you have to buy it from a manufacturer who has not sold 60,000 cars. So, find out which manufacturer has managed to sell the required number of cars and then buy one from that manufacturer to qualify for the tax credit.