Year-end steps to reduce 20ll tax bill

Christmas is over, and New Year's Eve is around the corner. That means it's time to think about last-minute ways to reduce your 2011 tax bill. Here are a few steps to consider, recommended by Gregory Rosica, a tax services partner with tax advisory firm Ernst & Young, and Jackie Perlman, principal researcher for H&R Block's Tax Institute:

Accelerate deductions and defer income: Make deductible payments and expenditures before the end of the year, and delay receiving any income you can until next year. For example, local property tax bills due in January that are paid in December can be itemized in this year's return.

Sell losing investments: If you own a stock or other investment that's lost value this year, selling before 2012 begins could help offset income and lower your tax responsibility.

Save energy and tax dollars: Among the credits expiring at the end of 2011 is one that allows a claim of up to $500 for energy-efficiency improvements to a home, such as installing new windows, a new boiler or insulation. This is a lifetime credit, so if you've already taken it in a previous year, you can't claim it again. The work has to be done by the end of the year to qualify.

Make a major purchase: Through the end of the year, taxpayers have an option to deduct state and local sales taxes in place of state and local income taxes on federal returns. If you're planning a major purchase like a household appliance, it might be worthwhile to buy it this week to boost that sales tax deduction.

Donate wisely: The holiday season is a popular time to make charitable donations, but cash dropped into a streetcorner kettle is not deductible. You must have receipts, credit card statements or canceled checks for all donations, and any donation over $250 also requires an acknowledgment letter from the charity that received it.