5 Most-Effective Tax Saving Tips for 2010

There are several ways to save money in tax. The only problem is, we don’t know how to do it. We don’t know which expenses or investments are deductible and which are not. So, here are few tax saving tips for 2010.

1.    Do not throw away receipts:

Throwing away receipts means throwing money. Yes, most if your business related expenses are deductible, but only if you have the receipts of purchase. Moreover, a job-related expense, not reimbursed by the employer is deductible too.

2.    Be well-versed with tax:

Majority of us lose lots of money paying huge tax because we don’t know various ways to dupe IRS legally. And trust me, it’s not difficult at all. Once you start learning about it, you will enjoy it. These tax saving tips for 2010, however, wouldn’t be useful if you are not interested to actively participate in it.

3.    Investments:

By making few minor modifications in your investment strategies you can save a considerable amount every year. Avoid short term capital gains as you pay more on tax than you actually earn through these gains. Make use of various tax free investments, which eventually save more money that you earn through high-returns investment.

Retirement investment too is one of the best tax saving tips for 2010. You can simply open an IRA or a 401k account, and deposit investment products in it, up to a limit.

4.    Donate to charitable organizations:

I know donating money is painful sometimes. But fret not because you can now reduce your taxable income by donating furniture, clothes, and many other such items. So, instead if throwing the old ones away, you can use them as deductions. And don’t worry about the traveling and carriage costs, they are deductible too.

5.    Gifts and Kids:

Instead of simply giving money to your children, you can use it as tax benefit. If have reached your retirement age and intend to give away your fortune as inheritance, don’t do it. Instead, give some amount as gift every year, which would save lots on inheritance tax.

If you kids are above 14 years of age and you are still giving them pocket money, stop it now. Instead, give them salary, which they can use as pocket money, and you can use as deduction.

These are very simple yet very effective tax saving tips for 2010. And there are numerous other that we might not know as individuals. Hence, if you think you are paying too much on tax, it’s wise to consult a tax attorney.