The one good thing about 2011's volatile stock market is that it might offer some tax savings. If you cashed in on some profitable holdings, sell assets that didn't do as well by the end of the year and use those losses to offset your capital gains.
If you have more losses than gains, you're not alone. But you also can deduct up to $3,000 in losses against ordinary income. If you have more than $3,000 in losses, you're probably not alone here either. Save the paperwork on that excess loss amount. You can carry it forward and deduct it in future tax years.
And don't forget to check your prior year's tax material to make sure you don't have any older losses to carry forward on your 2011 return, says David Fleisher, president of Firstrust Financial Resources in Philadelphia.
Now is also a good time to make sure you have updated the cost basis on your nonretirement holdings, says Fleisher. When you do sell the assets, you'll need the correct basis to determine whether you have a loss or taxable gain.