Tax Breaks for Investors

You can carry over last year's losses to off-set taxes in years to come.

Last year's bear market was brutal for investors. If you cashed in some of your losers before the end of the year, you may take some solace when you file your 2008 return. You can use them to reduce you tax bill. And, if your income places you in one of the two lowest tax brackets, you will pay no capital gains tax for 2008 -- assuming you had any gains for the year.

Assets held for a year or less are considered short-term. Those held for more than a year are long-term. In figuring your taxes, you first must match any short-term gains with short-term losses and long-term gains with long-term losses. (These strategies apply to your taxable investment accounts, not your tax-deferred retirement accounts such as 401(k)s and IRAs.)

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Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance