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Cut Your Taxes for 2011

10 ways to get a break

Washington certainly isn't making tax planning easier this year. With deficit reduction casting a big shadow, many popular tax breaks are being eyed for paring or elimination. Fortunately, a handful of perennials are unlikely to change — for 2011, at least.

See also: What's new for taxes in 2012.

man at table with large stones on his head to illustrate the need for tips to cut tax bills in 2011

There's still time to ease the burden of your 2011 tax bill. — Photo by Tim Bradley/Getty Images

Here are 10 ways to get a break:

1. IRA Charity. People 70 1/2 or older can donate up to $100,000 per person annually to the charity of their choice from their IRA and pay no income tax on the money. Originally created as an economic stimulus measure, it applies to those who must take required minimum distributions from their IRAs.

So instead of taking the money out and paying federal and state taxes on it, you send the money directly to a qualified charitable institution. Just remember that Uncle Sam won't let you also claim a charitable deduction for the contribution.

Consult a financial adviser to figure out whether this makes sense for you — it may depend on the particulars of your pocketbook.

2. Medical expenses. These are always worth monitoring. If your total medical bills exceed 7.5 percent of your adjusted gross income (your income minus certain expenses), you can deduct the amount above that threshold.

You're allowed to count a surprising number of products and services: acupuncture, artificial limbs, improvements to your home made for medical reasons, contact lenses, crutches, dental treatment, eyeglasses, hearing aids, insurance premiums for long-term care and Medicare supplements, nursing services, oxygen, therapy and wheelchairs.

$100 in red bow-Tax cuts for 2011

Taking steps now to reduce your taxes is like giving yourself a gift of cash. — Photo by Mike Kemp/Rubberball/Corbis

Even costs of "medical vacations" for surgery in a foreign country may be deductible, says Julian Block, a tax attorney in Larchmont, N.Y., and author of several books on tax preparation.

If your medical expenses exceed 7.5 percent of your gross adjusted income, "you can deduct $50 a day for lodging for you and $50 for your travel companion," he explains. "These expenses are often overlooked." Consult IRS publication 502 for details and a complete list.

If you're close to qualifying for the medical expenses break, it might make sense to go ahead this year with any costly elective medical expense you're contemplating, before any radical changes to the tax code are made.

3. Roth IRAs. Converting your traditional IRA to a Roth may make sense. Unlike regular IRAs, Roths permit tax-free withdrawals. But you've got to pay tax on any gains incurred when you convert.

Nearly every mutual fund or brokerage firm offers an online conversion calculator. Run the numbers to estimate whether the move is worthwhile for you.

Next: Miscellaneous deductions. >>

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