Capital losses could be especially helpful to higher income taxpayers facing the 3.8 percent Net Investment Income Tax . This surtax, part of the Affordable Care Act, applies to the unearned income of taxpayers with modified adjusted gross incomes of more than $200,000 if they are single or head of the household; $250,000 if married and filing jointly; and $125,000 if married and filing separately. High earners with investment income can reduce this new tax burden by using capital losses to reduce their taxable amount.
If you do face the 3.8 percent surtax, consult with your financial adviser and tax professional. In addition to figuring your modified adjusted gross income, you must take into account the different types of investment earnings that are subject to the tax and how to appropriately calculate losses within each category.
5. Make the most of your home
Homeownership provides a variety of tax breaks, some of which you can use by year-end to reduce your current year's tax bill. Make your January mortgage payment by Dec. 31 and deduct the mortgage interest on your coming tax return. The same is true for early property tax payments.
You also might be able to get some tax savings from upgrades to your primary residence. The residential energy efficient property credit is available for such things as added insulation, new windows and whole house fans .
The maximum credit amount is $500, and you must count any previous years' tax credit claims against that limit. But even if you can only claim $50 or $100, it is a credit, meaning it will reduce your final tax bill by that amount. Just make sure the home improvements are in place by Dec. 31.
6. Bunch your deductible expenses
Taxpayers who itemize know there are many ways on Schedule A to reduce adjusted gross income, or AGI, to a lower taxable income level. But in several instances, deductions must be more than a certain threshold amount.