The 2009 version of Pub 17, the IRS's basic publication covering income taxes for individuals, is available for download from the IRS Web site (pdf, 305 pages, 6.3 MB) via FTP download or Web download.

As 2009 draws to a close, we'll cover a variety of year-end tax strategies. I'm going to discuss capital losses first because so many investors are sitting on enormous losses.

Normally, the advice is to offset capital gains with capital losses. In other words if you've sold profitable investments, trying finding some losing investments you can sell off to minimize or eliminate your capital gains tax. However, investors have significant losses in 2008 being carried over, and have additional losses in 2009. Capital losses will offset capital gains, and any excess losses are deductible up to  $3,000 per year. In other words, if you have $250,000 of total capital losses and $100,000 in capital gains, then your net capital loss is $150,000, but your total capital loss deduction is only $3,000. The remaining $147,000 in losses are carried over to next year. If our hypothetical taxpayer stopped investing and never had another capital transaction, it would take him 49 years to use up all these losses.

So we might need to reverse the traditional advice and try to sell off investments with gains to offset losses. One strategy might be to sell off profitable investments and repurchase them immediately. This books a capital gain for tax purposes, uses up some losses, and gives you a new cost basis position in the investment. You might be thinking, isn't this tactic prohibited by the wash sale rule? No, the wash sale rule only applies when you sell an investment at a loss and repurchase the same investment within thirty days. If you're selling an investment at a profit, the wash sale rule won't apply.

Another tactic for using up capital losses: give appreciated stocks and other investments to someone with significant capital losses. Taxpayers can give up to $13,000 per year per person tax-free as part of the annual gift-tax exclusion. Using our hypothetical example of $147,000 in excess capital losses, a family member could give this individual stock or mutual funds or other investments that have appreciated in value with a cost basis of $13,000. The gains will be offset by the losses, and thus eliminating any capital gains tax.

Another strategy decision is deciding when to use up your capital loss carryovers. President Obama has proposed increasing the tax rate on long-term capital gains to 20%. It might be prudent to keep carrying over some capital losses to offset future capital gains.

Another interesting question about the homebuyer credit from my inbox. If someone already owns a home and wants to buy a new one, what do they have to do with their previous home? Or, as Jennifer phrases it, "[My husband] swears that he read somewhere that if you're a repeat buyer, you have to have a signed rental agreement on your current home, prior to buying a new one, in order to get the credit."

People who already own a primary residence can qualify for the homebuyer tax credit. The criteria is that they have owned and lived in their residence for at least 5 out of the 8 years ending on the date of purchase, and that the new home will be their primary residence.

The previous house can be rented out, or kept as a second residence, or sold, or let your kids live there. The only limitation is that the new home be your primary residence.

One source of confusion in the homebuyer tax credit is over how married couples are treated. I've received lots of emails about this particular point, including this question from Nick,

"I was recently married in May 2009. I have never owned a home. My wife has owned a home within the past three years. Can I still qualify for the tax credit if I buy the house myself?" Read more...