• Estimate your income, deductions, credits, and exemptions for 2010.

• Determine your marginal tax rate, which is the rate that your next dollar of income would be taxed at. This rate helps you evaluate whether it is worthwhile to use certain tax-planning strategies.

• Evaluate your estimated income tax liability for the year.

• Determine whether you will be subject to the alternative minimum tax (AMT) which will have an impact on tax-planning strategies.

Once you have an idea of where you stand for 2010 with your income tax situation, you can evaluate some tax-planning strategies that may reduce your income tax burden in 2010. Here are some tips to consider:

• Sell stocks with losses to offset capital gains. If you have capital gains income but are holding stocks with losses, consider selling those stocks to offset the capital gains. Excess losses may be used to offset up to $3,000 of ordinary income, and the unused portion can be carried forward until utilized.

• Contribute the maximum amount to your 401(k) plan. Take a look at your financial situation, making sure you are contributing as much as possible to your 401(k) plan. Unless you have a Roth 401(k), contributions are made from pretax dollars. When you invest in a taxable account, you have already paid income taxes on that money, so you will only be investing 65 or 75 cents instead of the dollar that would be going into your 401(k) plan. That difference makes a 401(k) plan tough to beat over the long term. The maximum contribution to a 401(k) plan in 2010 is $16,500, plus individuals age 50 and over can make an additional catch-up contribution of $5,500, if permitted by the plan.

• Decide which type of IRA to contribute to and then do so as soon as possible. Find out whether you are eligible to contribute to a traditional deductible or Roth IRA, and then decide which is the better alternative for you. Although you have until April 15, 2011, to make your 2010 contribution, contribute as soon as possible to allow your funds to compound tax deferred or tax free for a longer time. The maximum IRA contribution in 2010 is $5,000, with an additional $1,000 catch-up contribution for individuals age 50 or older.

• Replace loans that generate personal interest with mortgage loans or home-equity loans. Personal interest cannot be deducted on your tax return, while mortgage interest and home-equity loan interest can, as long as the mortgage does not exceed $1,000,000 and the home-equity loan does not exceed $100,000.

• Determine whether you should bunch income or expenses for 2010. Depending on your overall tax situation, it may make sense to accelerate or defer income and expenses. Some deductions that can be accelerated or deferred include payment of property taxes, estimated state taxes, medical expenses, and charitable contributions. Income that can typically be deferred includes self-employment income and year-end bonuses or commissions.

• Donate appreciated stock held over a year to a charitable organization. You can deduct the stock's fair market value as a charitable contribution without paying the capital gains tax on the sale.

• Sell assets on the installment basis. You can use this method to sell certain capital assets, particularly real estate, which will typically allow you to recognize the gain as the installments are collected, rather than in total in the year of sale. You may also want to consider a like-kind, or section 1031, exchange, which allows you to defer any tax liability.

• Consider transferring appreciated assets to children. If the children are in the 10% or 15% tax bracket, they can sell the asset and pay no capital gains taxes in 2010. These transfers can be made as part of your annual tax-free gifts, with a maximum tax-free transfer of $13,000 in 2010 ($26,000 if the gift is split with your spouse). However, be aware of the "kiddie tax" rules, which apply to all children under age 19 and to students under age 24. If the earned income of an individual over age 17 exceeds half of his/her support, the "kiddie tax" does not apply. The "kiddie tax" refers to the manner in which unearned income is taxed for children. In 2010, the first $950 of unearned income is tax free, the second $950 is taxed at the child's marginal tax rate, and any remaining unearned income is taxed at the parents' marginal tax rate. Once the individual exceeds the age limits, all unearned income is taxed at his/her marginal tax rate.

• Familiarize yourself with all types of income tax deductions, exemptions, and credits. There are a wide variety available, and you should be aware of any that apply to you. For example, many tax benefits exist for higher-education expenses, including Coverdell education savings accounts (ESAs), section 529 plans, and the Hope Scholarship and Lifetime Learning credits. Each has different eligibility criteria, so you need to be familiar with all of them to determine which will work best in your situation.

• Consider your long-term planning needs. In addition to lowering income taxes for 2010, you also want to find strategies to lower taxes in future years. Thus, it is a good time to review your entire tax situation to see if other changes are warranted. For instance, you may want to invest more in municipal bonds, whose interest income is generally exempt from federal, and sometimes state and local, income taxes. Or, you may need to reposition assets between your taxable and tax-deferred accounts to minimize taxes once you start taking withdrawals.