What to Do Now to Save on Taxes

There are plenty of steps you can take now to help lower your tax bill next year. The following strategies can help.

Make the most of stimulus tax breaks. The stimulus plan lets you write off state and local sales taxes paid on up to $49,500 of the cost of a new car purchased between February 17, 2009, and December 31, 2009. To qualify, your modified adjusted gross income must be less than $135,000 if single, or $260,000 if married filing jointly. First-time home buyers can receive a tax credit of up to $8,000 if they buy a new home by November 30, 2009. To qualify, your MAGI must be less than $95,000 if single or $170,000 if married filing jointly.

Contribute to an IRA. You have until April 15, 2010, to contribute up to $5,000 to an IRA for 2009 (or $6,000 if 50 or older). The money can grow tax-deferred for retirement in a traditional IRA, or can be tax-free in a Roth. See “Who Can Have a Roth IRA?” for details.

Sign up for a flexible-spending account for medical or dependent-care expenses. Your contributions avoid income tax and Social Security tax, which can save you 35 percent or more compared with spending after-tax money.