Clean up your taxable account
Don't be afraid to sell your deflated stocks. You can use the capital losses to offset the taxes you owe on gains.
By Ellen McGirt, Fortune senior writer

(Fortune Magazine) -- When it comes to stocks, breaking up can be hard to do. "People typically don't know when to sell," says Hughes. "But getting rid of clear losers can be beneficial."

The IRS allows you to use capital losses to offset an equal amount of capital gains. If you have more losses than gains, you can deduct the leftover amount from your regular income - up to $3,000.

stocks_dollars.03.jpg

If you have still more losses, you can carry them forward, deducting them year after year until you use them up. "Pull out last year's return," says Hughes. "People forget that they have a carryover coming to them."

One strategy to consider when generating losses is to designate the specific shares you want to sell. That would allow you to sell the shares you paid the most for, thereby increasing your offset.

When making these moves, beware the wash-sale rule: It prevents you from claiming a loss on the sale of a stock if you buy substantially identical shares either 30 days before or 30 days after the transaction.

Next steps:

7. Do a property insurance checkup

8. Check the new credits and taxes

Previous steps:

1. Rebalance your 401(k)

2. Revisit your estate plan

3. Sock it away

4. Give smarter

5. Review your health plan

6. Clean up your taxable account

_______________________________

Eight great year-end moves

Booking a capital loss. A reader wants to know if he should sell a stock to offset tax he will owe on interest from his CDs.

Timing your exit strategy. Getting into a stock is the easy part. Here are four tips for knowing when to bail out.

Track your portfolio. Register now and start using CNNMoney.com's free, comprehensive, and easy-to-use portfolio tracker. Top of page