Tax simplification?  Not this year.  The pages of tax regulations continue to grow, bringing added complexity and confusion. Even tax preparers have reason to scratch their heads.  This article contains a few reminders of tax deductions that may be available to you provided you act before January 1, 2011. 

Do before January 1, 2011. 

Charitable Deductions - If you itemize deductions, make sure cash contributions are post marked by December 31, 2010 or non-cash contributions are delivered before midnight.  It’s not a bad idea to get a receipt for non-cash donations.  Charities seldom provide an estimate of value of the contribution.  Programs are on the market that can help determining the value of items within IRS guidelines. 

Residential Energy Credits - You may be eligible for a 30% credit for installation of energy saving devices such as exterior doors and windows, insulation, heat pumps, furnaces, central air conditioners and water heaters.  The device(s) must be installed by December 31, 2010.  The maximum credit allowed is $1,500. 

Alternative Motor Vehicle Credit - Taxpayers are encouraged to improve the fuel efficiency of automobiles and help the environment by purchasing vehicles that qualify for the alternative motor vehicle credit.  Several factors come into play for this credit, so contact your automobile dealership as to which vehicles qualify and validate that information with your tax advisor.

Mortgage payments - Several parts of your mortgage payment are deductible if paid to the relevant institution before January 1, 2011.  You might consider making your January mortgage payment before December 31, 2010.  The interest portion of the payment is deductible in the year paid.  Property taxes are deductible whether paid out of an escrow account or self paid.  Pay any property taxes due before January 1, 2011. You can also prepay your 2011 property taxes should you desire, although that is only beneficial for one tax year.  Payments of mortgage insurance for residence are likewise deductible if made before January 1, 2011.  The amount qualified for deduction is subject to AGI (Adjusted Gross Income) limits.  See your tax advisor for specifics.

Retirement Plans - You may make contributions to an IRA or a Roth IRA up to $5,000.  If you are at least 50 you may make a catch-up contribution of up to $1,000.  There are income limitations for contribution to the Roth IRA with phase out provisions beginning at $105,000 adjusted gross income for an individual and $167,000 for joint filers.  Consider whether it may be to your advantage to convert your IRA into a Roth IRA if there are better long term tax results.  Talk to your tax preparer to determine whether this is beneficial to you.  If you have reached the age of 70 1/2 make sure to take the required minimum distributions as the penalty for failure to do so is a severe 50% of the amount not withdrawn.

Health Savings Accounts - You may establish a health savings account (HSA) through an employer’s cafeteria plan.  To be eligible you (1) must be covered by a high deductible health plan, (2) must not be covered by any other health plan that is not high deductible, (3) must not be enrolled in Medicare and (4) cannot be claimed as a dependent on another person’s tax return.  You may want to adjust the amount set aside or 2011 if you did not set aside enough in 2010.  Over-the-counter drugs (non-prescription drugs) are not qualified for reimbursement from an HSA in 2011. 

Estimated tax payments - You may want to increase the amount of your estimated payments if you have been assessed a penalty in the past for under payment of the tax.  For individuals, the fourth quarter estimated tax payment is due January 18, 2011.

Estate taxes - If there was ever a good year to die (from a tax stand point) 2010 is the year.  Due to Congress’ attention being focused on health care legislation, and perhaps a little oversight on their part, there is no limit on the Estate Tax Exemption and the Maximum Estate Tax Rate is 0% for 2010.  There may be a real problem next year, however.  Unless Congress acts, the Estate Tax Exemption will drop to $1 Million from the $3.5 Million in 2009 and the Maximum Estate Tax Rate will leap to 60%.  Just to be clear, the government would get 60 cents of every dollar from a persons estate.  How fair is that?

There are many other possible tax implications for some individuals who have a fairly complex financial structure.  I suspect you know if you are in that situation.  If you have any tax concerns, see your tax advisor before December 31, 2010.