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How to Make Last-Minute, Money-Saving Tax Moves




By Dinah Wisenberg Brin, special to CNBC.com

NEW YORK ( CNBC) -- Taxpayers looking for ways to trim their 2011 tax bill, or simply to avoid unpleasant surprises when they file their returns, have a few weeks to make potentially helpful, money-saving moves.

Whether it's buying a needed energy-efficient heating system, donating stocks that have appreciated, or increasing 401k contributions, taxpayers can take a number of steps by Dec. 31 to make for happier 2011 returns come filing time.

"If you're going to have a big tax bill due in April I'd like to know about it now so you can plan for it," says Melissa Labant, tax manager at the American Institute of Certified Public Accountants (AICPA). She suggests taxpayers use a free withholding calculator on the irs.gov Web site. ( Or try CNBC's .)

Capital gains in focus

Meanwhile, a number of strategies are available to help retirees, college families, homeowners, investors and lower-income earners lighten their tax burdens.

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Chuck Neff, a certified financial planner and certified public accountant with private wealth manager Balasa Dinverno Foltz in Ithaca, Ill., notes that 2011 is one of the last years taxpayers in the lowest two brackets can sell winning securities without paying the long-term capital gains tax.

This provision, expiring at the end of 2012, applies to single taxpayers with up to $34,500 in taxable income and married couples with up to $69,000 in taxable income.

More broadly, investors with taxable mutual funds should check to see whether any large short-term gains distributions are in the offing. If so, Neff says, investors may save by converting that short-term gain to a long-term gain by selling before the record date for the distribution.

A $10,000 short-term gain distribution, for example, could be taxed at 28%, while the gain for investors selling before the record date would be taxed at the 15% long-term capital gains rate, he said.

The AICPA's Labant encourages investors to call their brokers now to see whether they had large capital gains this year, rather than waiting until April, when it's too late to mitigate the 2011 tax effects.

"Maybe it makes sense to trigger some losses to offset those gains," she says. Investors can sell losing stocks, wait 31 days and buy them again if they like the company, she adds.

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