Tax Planning Tips Specific to 2010 Only

o    Energy efficient home improvement credit expires at end of 2010. Certain types of energy-efficient home repairs can result in a federal tax credit. Replacing windows, doors, and replacing HVAC system and installing new insulation all count towards this tax credit.

o    Hybrid vehicle tax credit expires for all models.

o    Guaranteed 15% maximum rate for long-term capital gains. For 2011, the top rate might go back to 20% for long-term gains. Qualified dividends lose their preferred tax rate and revert back to being taxed at ordinary income tax rates.

o    Child and dependent care tax credit will be reduced starting in 2011. For 2010, the child care credit is available for the first $3,000 of day care expenses for one child and the first $6,000 of day care expenses for two children, with the maximum tax credit set at 35% of expenses. For 2011, the credit will be limited to the first $2,400 of expenses for one child and $4,800 of expenses for two children, with the maximum credit being 30% of expenses.

o    Child tax credit at $1,000 per child. For 2011, the child tax credit will revert to $500 per child.

o    Computers as a qualified expense for section 529 college savings plans expires at the end of 2010.

o    Earned income credit for third child ends in 2010. For 2011, the EIC will be based on at most two children.

o    Student loan interest deduction is scheduled to change. Beginning in 2011, interest paid on a student loan will be deductible only for the first 60 months of repayment, and the phase out range will start at $40,000 (or $60,000 for married couples filing jointly).

o    American Opportunity tax credit for undergraduate education expires at the end of 2010. It will revert back to being the Hope credit for the first two years of undergraduate education.

o    Making Work Pay tax credit expires at the end of 2010.

General Tax Tips for 2010

1. Review your income, expenses and potential deductions: Before you can make any adjustments, you will need to look closely at how much you are earning, spending, and saving and what you can deduct.

2. Review your portfolio: If capital gains are high, consider taking a loss to offset some of the capital gains income.

3. Defer income: Unless you have reason to believe that next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year. If you are self-employed, for example, send the last invoices out late in December so you will more likely receive payment in January.

4. Use up your flex spending plan: If you have a flexible spending plan, which means you have put aside tax-free earnings to cover medical and dental expenses through a plan offered by your employer, you need to use it up. Make doctor appointments now and buy necessary medical supplies that are covered in the plan.

5. Pay your January 1st mortgage payment on or before December 31st: This allows you to take an additional deduction for interest paid. Remember to add the interest amount to the amount reported by your lender when they send you a 1098 form.

6. Be careful about buying an actively managed mutual fund: The later it gets in the year, the more likely you will pick up the capital gains distributions on a mutual fund you hardly own. Check the distribution schedule and if it's late in the year, wait before buying the fund.

7. Teachers, take a deduction from your students: You can still take up to a $250 deduction on materials purchased to make the learning experience better for your students. This deduction is also applicable for principals and others who are employed in a school. If you’re not sure if this deduction applies to you, contact the IRS.

8. If you're self-employed, stock up: This is the time to buy all of the business equipment and supplies you haven't yet purchased. Make sure to mark and save your receipts.

9. Prepay your state and/or local taxes: If you don't think your personal income tax bracket will be higher next year, and you're not affected by the alternative minimum tax, you can make state and/or local tax payments before the end of this year so you can take a deduction this year.

10. Make charitable donations: If you have extra cash, donate money to charity. Save the receipts and use the charitable donations as deductions on your tax return. These are some of the ways in which you can make appropriate changes to lessen your tax bill.

11.  Maximize home deductions

You can deduct interest on a second home as long as your combined home mortgage debt does not exceed $1 million.

12. Don’t forget to use annual gift tax exclusion.

If you may have to pay estate taxes eventually, consider establishing a gifting program for your children and grandchildren to take advantage of the annual gift tax exclusion. Gifts of up to $13,000 per donee ($26,000 for married couples) are generally excluded from gift tax in 2010 and will be removed from your estate, with no limit on the number of donees. In addition, payments of tuition to an educational institution for the benefit of your children or grandchildren are excluded from gift tax.

10 Tax Tips for the Self-Employed

1. Keep very good records: Unlike a large company in which someone is hired to maintain records of all income and expenses, it is up to you to keep very good records, save all receipts and be able to support your deductions.

2. Office space: Whether you have a separate office facility or are using a portion of your basement or a converted den, you can deduct the percentage of your home used exclusively for business purposes. Take this percentage off of your mortgage or rent payments as well as your utilities. If you have a phone exclusively used for business, deduct those phone bills.

3. Don’t forget business expenses: Keep receipts and good records of business travel and other expenses including office supplies, postage and shipping costs, dues, subscriptions, and anything else business-related, including computer software for your business and upgrades to your system.

4. Deduct child care costs: There are allowable deductions for daycare, nanny care, babysitting and any other type of childcare provided while you are working. Take the deductions allowable.

5. Set up a retirement plan: You should consider setting up a self employed qualified retirement plan (i.e. SEP IRA) not only for tax purposes but for the same of saving money for your retirement years. If you wish to start with more than $2,000, you can opt for a Keogh plan, which allows you to put away more into tax-deferred savings for your retirement.

6. Employ family members: You can deduct medical expenses for your entire family by employing them legitimately.

7. Defer income if necessary: Being self-employed, you can alter your billing slightly to defer income if you see yourself heading into a higher tax bracket.

8. Get money back from FICA: Being self-employed, you pay both the employer and employee portions of Social Security tax. You can, however, deduct half of these payments on your 1040 form.

9. Increase expenses if necessary: Just as you can elect to defer income, if you see that your income is high, you can make many more year-end business purchases to add some tax deductions before December 31st.

10. Get the right help: Look for tax help from someone who is familiar with self- employment, since your needs will differ from those of a company.