by Ryan McKeown, CPA, CFP®, Vice President – Financial Advisor, Wealth Enhancement Group

They have a much better feel for your personal situation and can give you personalized strategies for your situation. The next 9 ideas, while they can provide significant tax benefits, may or may not make sense in your personal situation. There are so many variables to address that not all of the details can be covered in this article.

2. Be Charitable

Clean out your closet or garage and donate those items to your local Salvation Army or similar charity.

Make an extra donation to your favorite charity by December 31st. If your charity accepts credit cards, you could charge your donation before year-end to have it count for this year’s tax return even though your card’s bill might not come until January of next year.

Donations of Appreciated Assets or Business Inventory. Most qualified charities accept donations of appreciated stocks or bonds, as well as unsold business inventory such as unsold corn/grain (it is very common for those in the agricultural industry to donate commodities) or clothing, eyeglass frames, canned goods, etc.

Donor Advised Fund. A donor advised fund is a special account you can make tax deductible contributions or appreciated asset to now, but decide which charities receive those funds at a later date.

Direct Charitable Rollover. Unless congress acts, this will be the last year for taxpayers age 70 ½ or older to make a charitable contribution directly from an IRA. This is very beneficial for those who don’t itemize their deductions or would have had deduction limits or Medicare premiums increase if they had taken withdrawals from the IRA to make a donation.

3. Bunch your Itemized Deductions

If you are close to being able to “itemize deductions”, but not quite yet over the standard deduction, you might want to make extra charitable deductions, pay state or property taxes, pay January’s mortgage payment, medical expenses in December 2009 to take advantage of tax benefits without doing a whole of lot things differently, just timing your deductions to maximize your tax benefits.

4. Buy Something

New Car. You can deduct your sales tax in full up to $2,500 if purchased by December 31st, subject to income limits.

If you own a business, purchase equipment or take an extra trip to the office supply store to get more deductions this year.

5. Take some gains

Currently, long-term capital gains rates are at historically low rates of 0-15%. It is likely these rates will go up in the future, so it might be advantageous to take advantage of what is currently available.

Use up capital loss carryover. If you “harvested” your capital losses in 2008, it is possible that you a large amount of “capital loss” carryover still remaining. You could sell assets that you may have capital gains on in 2009, offsetting those gains with your remaining capital loss carryover. Otherwise, you are limited to taking a $3,000 deduction per year against your ordinary income, which may take a significant amount of time to deplete. One quick point to make is that for the asset that you sell at a gain to soak up losses can immediately be re-purchased without any tax consequences. The tax code’s 30 day wash sale rules only apply to taking losses.

6. Take some losses

Even though the stock market is up this year, you still might find that some of your portfolio holdings are still at a loss. You can sell those assets and deduct up to $3,000 per year against ordinary income. The remainder carries forward for future use indefinitely. The assets much be held in a non-qualified, or “taxable” account, as opposed to IRAs or other tax deferred or advantaged plans to deduct these losses.

7. Fund an IRA or Roth IRA

Don’t wait, start the tax savings now. If you have funds in a savings account, more than likely you are earning a pitiful interest rate that is also taxable. You can put up to $5,000 ($6,000 if age 50 or older) into a Traditional or Roth IRA, which each have their own separate tax advantages until April 15th. Certain income limits apply.

8. Distribute or Convert

If your income is lower in 2009 than it will be in 2010, you could take a withdrawal and pay tax at a lower rate this year. You could also convert all or a part of a Traditional IRA or other qualified retirement plan to a Roth IRA now and never have to pay tax on those funds again!

9. Get Educated

Education Tax Credits have been expanded tremendously. If you don’t have a bachelor’s degree (no matter what age), now is a good time to take a look at continuing your education. The American Opportunity Credit provides for a tax credit as much $2,500 on the first $4,000 of qualifying tuition and other education expenses. Pay your spring semester tuition or purchase your books before December 31st and you could receive the benefit of extra tax credits (not a deduction!) for this year.

10. Fix-Up/Buy a House

Home-Buyers Credit. Congress has extended the credit for purchases through April 30th, as well as to existing homebuyers who have owned and lived in the same home for five of the eight years preceding the new home purchase (the new home must become the buyer’s principal residence). The credit can amount to 10% of the purchase price up to $6,500 (existing homebuyers) or $8,000 (first-time homebuyers).

Make energy efficient improvements (windows, doors, furnaces, much, much more) & receive a 30% tax credit on the first $5,000 of qualifying property purchases (a $1,500 credit). These improvements must be installed by December 31st in order to count for the credit in 2009.

These are a few brief overviews of some tax items that you should not only be thinking about, but trying to take advantage of. There are many favorable tax provisions that will only be in place for a short while, as they may not be there in future to take advantage of. Make sure to call your financial advisor or tax professional to discuss if any of these tax provisions can benefit your situation.