If you think this might not work for you, think again, especially if you own mutual funds. "A lot of mutual funds have a lot of gains even if the fund's overall value is lower. This is because during the year, fund managers sell holdings and take gains that then are passed through to the individual fund owners. You need to ask yourself," says Kunkel, "whether you're willing to sell some of your assets to get a tax loss to offset some of these unexpected gains."
2. Slip through the second-home loophole
If you have a second home you one day plan on selling, you might want to move into it before the end of the year. On Jan. 1, 2009, a tax loophole that allowed multiple homeowners to defer much or all of the gain from the sale of their other properties will close.Currently, if you sell your primary residence after living there two of the five years before the sale, up to $250,000 in profit, or $500,000 if you're married and file a joint return, is tax-exempt.
Owners of multiple properties were able to use this tax break by simply moving into another property they owned, living there long enough to convert it to their principal residence and then selling. Now, however, if you make that move on or after Jan. 1, 2009, you'll have to prorate your ownership of the converted property and pay tax on the gain for the period it was your second home. Bankrate's story "New tax rules could cost second homeowners" has details on the law change.
The bottom line is that if you are considering multiple home sale options, you need to speed up your timetable or pay the tax price.
3. Get help from your main home
As for your primary residence, it still offers some perennial year-end tax-break moves.Start with your next mortgage payment, due Jan. 1. This actually represents interest for the month of December, so if you accelerate a bit you'll get an additional itemized deduction this tax year for the interest paid.
The same early payment approach also applies to deductible property taxes. If your county or municipal tax collector will take your payment (or part of it) in December, pay it now to accelerate the tax benefits.
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New for 2008, homeowners who don't itemize will get a property tax break, too. If you claim the standard deduction, for the 2008 (and 2009) tax years you'll be able to use your property taxes to increase your standard write-off amount. Single homeowners can increase their standard deduction by up to $500 (or the amount of property taxes they pay this year (whichever figure is smaller). Married, joint filers can bump up the deduction amount by as much as $1,000.
If this new deduction option applies to you, consider paying your property taxes by Dec. 31 so you can claim the added standard amount on your 2008 return.