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Countdown quickens for tax savings
Friday - 12/10/2010, 10:31am EST
Senior Internet Editor
The year is winding down, but you've still got a few weeks to save on your 2010 income taxes. You'll have to reach into your bank account for some credits and deductions, but not for all of them.
"It doesn't have to be cash or a check. It could be other things," Ed Zurndorfer, registered employee benefit consultant, told Federal News Radio.
If you itemize, you'll reap some tax savings, said Zurndorfer, consider donating to a charity before December 31st even if the bank account is getting a little low or you're hanging onto your cash for holiday spending.
"What they could do," said Zurndorfer, "is to charge. Many charities will accept a charge - a MasterCard, VISA, things like that. And this way, when you charge it, you won't actually have to pay it until January. But the IRS says if you charge your charitable contribution, you will be able to deduct it even though you're actually paying for it in the next calendar year."
Sign up for the CFC. As long as the money comes out of the paycheck between now and December 31st, you can deduct the contribution from your 2010 taxes.
Donate goods, suggested Zurndorfer. Clothes, furniture, etc. While you can't deduct the whole cost, you can list it as a charitable goods donation. The key is to get a receipt. If you write a check, you can make a copy of the check, "but ideally the charity will give you a receipt for your donation." If you donate more than $250.00 you must get a receipt.
Even if you're not sure how much that klunker in the driveway is worth, said Zurndorfer. "You could look at the BlueBook value. The charity is obligated to help you in that sense. The value they give to the car, they really have to have some legal basis. Also if the charity turns around and sells the car themselves, you can not deduct the value of the car you donated to charity. If the charity uses the car, or let's say the car is not in working condition. The charity fixes it up and uses the car in its own operation, then you can write off the value of the car. But you also have to get a receipt from the charity for that donation of the car. Even if it's like $75,00."
Checks made out to an individual like a rabbi, priest, etc. do not count towards deductions. Checks must be made out to an organization, said Zurndorfer.
College Savings Plans
The so-called 529 plans. The money that you put into these plans is not deductible for federal income tax purposes, but in many states you could apply the contribution towards the state income taxes as a deduction or credit, depending on the state. Zurndorfer stressed to contact your state's 529 plan for limits and said the December 31st deadline usually applies to these as well.
Even if you don't have children headed for college, making contributions to a plan for your grandchildren might make for a great holiday present and deduction at the same time. Since some states allow this and some don't, as always, consult your tax professional for advice.