Top 8 Last Minute Tax Deduction Strategies For 2009

When it comes to tax deduction strategies it’s never too late. 2010 is just round the corner, but you still can apply some last minute tax deduction strategies and welcome 2010 with more tax savings. Here’s how you go about it:

Make Contributions to Your 401(K)

There’s still time to make contributions to your 401(k) for this year. The traditional IRA contribution deadline is the 15th of April, 2010 for the 2009 year. The maximum you could contribute is $16,500 for both this and the coming year. If you are over 50 the limit is $22,000. Consult your employer to see if you could still make contributions for your 401k.

Wait Till Next Year to Make Roth IRA Conversions

If your modified gross income is less than $100,000 you can convert it to a Roth IRA. From next year, this $100,000 limit will be lifted so that anybody can avail the Roth IRA conversion. The revenue from the conversion can be distributed over the next couple of years after 2010. This offer is feasible only for 2010. So just wait, and like so many others, take full advantage of this.

Sell Off Non-Profitable Investments

The S&P Index 500 was pretty shaky this year. In March it touched an all-time low of 666 and later bounced back to a high of 1,119. Under uncertain market conditions it is always advisable to sell off the investments that are not brining you any profits. The very first thing that you should do is to sum up your total profits and then subtract your losses from that. If the losses are more than $3000 you can carry over the losses to the future years.

Sell Long Term Investments

Selling long term investments in both this year and the next, will exempt you from paying taxes on the resulting capital gains. For your investment to be considered a long term one, you must have made profit from a security like a stock or an investment fund. You must have held the security for over a year, for the investment to be considered a long term one.

Donate, If Not for Charity, For Tax Deductions

Making donations will get you tax deductions in the same year as the donations are made. This is the holiday season and Christmas is round the corner. Hunt for some precious little items in your house which can be of use to those poorer than you and donate. You can also make cash donations and take the receipt from 501(c)(3).

Pay Up your January Mortgage in December

Paying up your January mortgage in December will earn you a deduction in tax on mortgage interest payment. You’ll get the advantage of paying up the mortgage for one whole month in advance.

Pay Up Medical Bills

If your medical expenditure amounts to more than 7.5 % of your adjusted gross income, you get a tax deductible on payment of your bills.

Use Tax software

Visit a personal finance website such as Mint.com to know completely what you could to avail tax deductions to the maximum. Online tax software, such as Turbo Tax, is of great help for making tax related calculations. Tax Caster is a software from Turbo Tax which will help you in finding out the tax overhead on you and find out ways in which deductibles can be applied even in the last moment.