There’s still time before October 17 to save on your 2010 taxes
With the October 17 deadline for 2010 taxes less a week away, you may be wondering what, if anything, you can still do at this point to lower your 2010 taxes. Well, rest assured, there are a few more steps you can take to minimize the amount you fork out to Uncle Sam next week.
Accelerate Your Deduction for Equipment Purchases:
If you are self-employed and purchased equipment, such as computers, software, or furniture, you can deduct these costs when filing 2010 taxes. Normally they are spread out over several years, but if you really want to lower your 2010 taxes, you can opt to accelerate the deduction and accrue all of the benefits this year.
You can accelerate the deduction for these purchases through bonus depreciation by taking a Section 179 deduction. Doing so could mean both lower income taxes and lower self-employment taxes. Just note that while such an acceleration could very well mean lower taxes for 2010, it will also mean a relatively higher tax burden over the next few years.
Contribute to a Retirement Plan:
Another way for the self-employed to save on federal 2010 taxes is to make a last-minute contribution to a SEP-IRA, SIMPLE IRA or solo 401(k) retirement plan.
Making additional payments to these plans will increase your deduction. Be aware, however, that you must make your contributions before the October 17 deadline in order for it to count on your 2010 taxes.
Accelerate Your Roth Income to 2010:
If in 2010 you converted traditional IRA funds into a Roth IRA, then you may be wondering when to pay taxes on your 2010 Roth conversion. Ordinarily your Roth income would be spread out over 2011 and 2012, half in each year, but you have the option of reporting all your Roth conversion income in 2010.
You can accelerate your Roth income to 2010 using Form 8606. By accelerating, you will get all the benefit on your 2010 taxes, but note that your 2011 and 2012 taxes will be higher than they would have been.
Claim the Making Work Pay Tax Credit:
The final way you could still save money on your 2010 taxes is by claiming the Making Work Pay tax credit. 2010 is the last year the credit is available and it could be worth up to $400 for taxpayers with wages or self-employment income. The IRS has adjusted withholding from paychecks, so you should already have seen the benefits of this credit over the course of the year. But to make sure you get your due you still have to claim it. Use a Schedule M to do so.
