Year-end moves to trim your tax bill

By Jeff Schnepper

Yes, it's November. The holidays are nearly here. And my gift to readers is a gentle reminder to make those last-minute tax moves.

I say this every year: Your tax planning for your 2009 return should have started last December. It's more complicated this year because tax laws have changed again. They always do.

Still, there are moves you can and should make before Dec. 31 to trim your 2009 tax bill.

Let's start with the simple things.

The easy stuff

Charitable donations. If you contribute to your church, your college, the local dog pound, the United Way, organizations that help with disaster relief or whatever, make these donations before Dec. 31.

And make sure, before you file your tax return, that you have a receipt from the organizations that benefited from your generosity.

If you don't have the cash, find out whether the organization can process a donation via credit card. As long as the donation is made by Dec. 31, it's valid as a 2009 deduction, even if you don't pay the bill until next year.

Separately, any contributions of clothes or household goods must be in good condition or better to qualify for a deduction. If a single item has a value of $500 or more, an appraisal is required. The Internal Revenue Service can deny a deduction for items of minimal value.

Complicating any deductions are new requirements on record keeping. This is important.

To deduct a cash donation, regardless of the amount, you must have a bank record or a written communication from a charity showing the name of the charity name and the date and amount of the contribution. Acceptable bank records include canceled checks or bank or credit union statements containing the name of the charity and the date and amount of the contribution.

• Talk back: What money moves do you plan to make by Dec. 31?

Your flexible spending account, or FSA. This isn't exactly a tax savings, but if you don't use the dollars you contribute to a flex plan, you lose them.

The IRS allows purchases made up through March 15, 2010, to count. Your employer can give you a debit card for your FSA spending. You can even pay for nonprescription drugs through an FSA. That eliminates a whole lot of paperwork.

Be careful, though. Unless your employer's plan also is amended to allow the March 15 extension, you won't qualify.

Mortgage interest. Make your Jan. 1, 2010, mortgage payment by Dec. 31, 2009. Remember to add the extra interest paid to what your bank reports on its Form 1098 -- it'll get your payment in 2010 and won't report it for 2009. But you paid it then, so it adds to your deduction this year. (The downside is that you won't be able to deduct the payment from your 2010 return.)

Video: The impact of the first-time homebuyer tax credit

Real-estate taxes. If you pay your own real-estate taxes, make any payments due in the beginning of 2010 by Dec. 31, 2009. My fourth-quarter real-estate tax is due Feb. 1, 2010. By paying before the end of 2009, I can get the deduction a year earlier. (Again, you can't deduct payments made in 2009 from your 2010 return.)

A friendly warning: Taxes aren't allowed as a deduction under the alternative-minimum-tax computation. If you think you will be hit by the AMT, don't prepay.

Continued: More moves to cut your bill

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