"It's a very good idea for some people, but you have to go through some calculations," says Steve Henley, national tax practice leader with CBIZ MHM in Atlanta. "It depends on what you think your tax rate will be when you retire and what you think your investment rate of return will be going forward."
Buy a house
The first-time homebuyer credit is no longer available, but owning a home still offers many good tax breaks.
Sure, the bipartisan National Commission on Fiscal Responsibility and Reform has suggested that the mortgage interest deduction be eliminated or at least reduced. That won't happen any time soon.
Other home-related costs, such as property taxes and points paid to get a lower home loan interest rate, also are deductible, as is interest on home equity loans up to $100,000.
The biggest home-related tax benefit, though, could come when you eventually sell. As long as you live in your home for two of the five years before you sell, you won't owe taxes on up to $250,000 in profit (or $500,000 for a married couple filing a joint return) from the sale of your principal home.
And if you did take advantage of the very first first-time homebuyer credit on your 2008 tax return, remember that when you file your 2010 Form 1040 this year, you'll have to start paying back that $7,500 tax break.
Create a bunching strategy
Medical costs also could become tax savings if you have enough of them to deduct. To claim them as itemized deductions, you must have incurred medical costs of more than 7.5 percent of your adjusted gross income.
Miscellaneous itemized deductions also have a threshold you must meet before the costs can be of deductible value. That amount is 2 percent of adjusted gross income.
These targets mean that if your adjusted gross income is $50,000, your medical write-offs must be more than $3,750 and your miscellaneous expenses more than $1,000 in order to benefit you on your Schedule A.
Start planning your tax-deductible expenditures early in the tax year, and you'll make sure you clear these deduction hurdles. This is known as creating a bunching strategy, since it usually entails moving, or bunching, expenditures into one tax year so you can take advantage of itemizing them.
Give to charity
You don't have to meet a threshold to deduct your charitable donations. As long as you give to an IRS-qualified organization within the tax year, you usually can claim as an itemized deduction the full amount that you give.
Typically, folks wait until the end of the year to donate to charities. Consider spreading your giving throughout the year.
The groups that get your dollars or goods will appreciate the donations earlier in the year when their accounts might be running a bit low. And by giving early, you won't have to worry about your philanthropic nature competing with your holiday gift-buying tasks at year's end.