Cut Your Taxes for 2011

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.

4. Miscellaneous deductions. If you itemize on Schedule A of your 1040 — and don't take a standard deduction — there are a bevy of expenses you may be able to deduct. Grab your receipts and see if they exceed 2 percent of your adjusted gross income. If they do, you've got a deduction for the amount above that level.

Here are some popular items to tally up: Dues to professional societies; home office expenses (in an area used exclusively for your business); subscriptions to trade journals and professional publications; job-search expenses; work-related transportation, meals and lodging; and work-related education. See IRS Publication 529 for more details.

5. Retirement plan contributions. You have until Dec. 31 to put money in your 401(k) or 403(b) plans. Any contribution will reduce your taxes — you pay none on money you put into your plan.

For IRAs, you have until April 17 to make contributions. Keep in mind that Roth IRAs and Roth 401(k)s tax your contributions, but withdrawals are tax-free. If you think taxes are going up — as many pundits predict — a Roth might be a good move.

6. Capital gains and losses. If you have a stock that's risen in value, this might be a good year to take the gain and get taxed at the 15 percent rate for long-term (held more than a year). The Obama administration has discussed raising the capital gains rate to 20 percent.

And do you have some losers you want to prune from your portfolio? For losses that exceed your gains, you can claim a deduction of up to $3,000 annually — $1,500 for married taxpayers filing separately.

7. Mutual funds. If you're thinking of buying into a mutual fund before the end of the year, be aware of the tax liability. Funds pay year-end distributions in December, so you may get hit with taxes on a fund you've only held for a few weeks. This is not a problem, though, if you make the purchase within a qualified retirement plan such as an IRA.

8. Energy savings. Making certain energy-related improvements to your home will cut your tax bill. For instance, you can get a credit of 10 percent of the material cost of qualifying types of insulation in your primary home, up to $500. Some of the energy credits, like that one, expire at the end of 2011. Get more info about 2011 energy credits.

9. Receipts and bills. Keep them. Gather them now, not next April, so you or your tax planner can get a heads up before the year ends. For a referral for a fee-only financial planner, contact the National Association of Personal Financial Advisors.

10. Direct deposit. If you're due a refund, sign up for direct deposit. You may not be saving on your taxes, but you'll have the satisfaction of getting your money faster.

For general tax information, the IRS has a number of free guides and forms online that can help. Also, check out AARP Foundation Tax-Aide, a free program that offers services to low and moderate income taxpayers, with special attention to those 60 and older.