Year 2010 may bring many great things, financially speaking, for your IRA account. In 2010, everyone will be allowed to convert his/her IRA account to a Roth IRA. In a traditional IRA, your investment can grow and taxes are deferred until the money is withdrawn in retirement. If you decide to convert to a Roth IRA, you must pay taxes at the time of conversion on any investment you made pre-tax. Subsequent contributions are taxed at the time of investment, so you don't have to pay any additional taxes at the time of your retirement.

The difference in 2010 is that there is no longer an income limit cap for a Roth conversion. Previously, income was capped at $100,000, eliminating the option to convert from a traditional IRA to a Roth for many taxpayers. Currently, this cap has been "permanently removed" (as permanent as any tax code change is)! Taxes must be paid on the conversion, but you may spread it out over two years to defer the tax hit (2011 and 2012); or 100% of the conversion may be recognized for taxes in 2010. The benefit comes in retirement when you can withdraw your investment and growth tax-free.

This is a potentially big decision for many of our clients. To help determine if you'll benefit from the conversion, try this Roth vs. Traditional IRA Calculator.

For more information, check out this article.

New windows? New water heater? New Roof? Insulation? If you purchased any of these items in 2009 or plan to in 2010, let's hope they're energy efficient! If they were, you may be eligible for a tax credit of 30%
(up to $1,500). Check out which household appliances qualify.

If you qualify, submit Form 5695 with your taxes before April 15, 2010.  Save the receipt and Manufacturer's Certificate Statement for your records.

To read more about what is eligible and to estimate your savings, see our blog article about the credit.

 Did you purchase a car this year? Between
 February 16, 2009 and January 1, 2010? You
 could be eligible for a tax break in April. The tax
 deduction is good for state, local, and excise
 taxes for up to $49,500 of the purchase price
 on the vehicle. There is an income phase-out for this deduction, and it is available whether you itemize or not. Click here for more information.

Making a charitable contribution keeps getting more and more difficult, from a tax perspective that is! To receive a tax deduction on such contributions, several requirements must be met:

• Itemize deductions on your tax return (1040) on Schedule A.
• The donation must be made to a qualified organization. Click here to find one.
• Maintain a record of the donation -- either a bank record or statement from the donee.
• The fair market value of the donation may be deducted minus any benefits received (products, meals, etc). Click here to find the fair market value of a donation.
• If your donation exceeds $500, you must also fill out Form 8283 with your tax return.