Tips on how to lower 2010 income tax returns

Taxpayers may want to start considering some ways they can reduce the amount of money they will owe the Internal Revenue Service, despite April 15 being a couple months away.

Capital gains are the profit one receives from investments into capital assets, such as stocks and bonds, that are more than the original purchase price. Capital gains tax rates are the profit realized on the sale of a non-inventory asset were purchased at a lower price. Currently, they are at an all-time low. If taxpayers sell their appreciated assets they have owned for more than 12 months by the end of the year, they will owe less to the IRS, according to Bankrate.com.

Donating to a charity or nonprofit organization can also save people some money. Individuals who itemize their deductions can claim their donations. Under the current Bush tax cuts, there is no itemized deduction limit for anyone. Taxpayers who have a large income may want to take advantage of this by giving to many charities of their choice. However, increasing deductions may cost people more if they owe under the alternative minimum tax. Seeing a tax preparer may be a good way to make sure donating to a charity is best for them.

Now that the $100,000 income threshold is gone, anyone can switch their traditional individual retirement arrangement to a Roth IRA. Taxpayers who move to a Roth account from a regular IRA before the end of the year can defer paying taxes on those accounts until they file their 2011 and 2012 tax returns.

The last stimulus package will give taxpayers a break who make their home energy-efficient. With some easy home improvements, such as replacing doors and windows, installing new insulation and heating and air conditioning systems with greener models, people can receive a $1,500 tax credit on their 2010 taxes. Even the purchase of a hybrid car can earn people the credit. The vehicle must be bought by the end of the year and it is important for individuals to make sure their car qualifies, as the program has limited many alternative fuel automobiles.

Tax credits may significantly reduce how much a taxpayer can owe the IRS. It also may be a good idea to see a tax preparer who can help individuals find which tax credits apply to them.
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Liberty Tax Service provides computerized income tax preparation and electronic filing. Each tax office offers customers audit assistance, a money back guarantee, and free tax return checking.