Perhaps the only bit of good news to emerge from the plummeting investment markets of 2008 is that your income tax burden might be lighter this year. Regardless, there are things to consider before the books close on this year, so let’s review them:

Tax Losses — If you are an investor, the odds are that the value of your investments declined in 2008. However, just because they went down, it doesn’t mean you can claim a tax loss. First, you can only claim the loss on investments held in personal accounts, not in retirement accounts or annuities. Second, you actually have to sell the investment — you just can’t claim a loss because it is worth less. If you sold investments early in 2008 for a gain (what a smart or lucky person you must be), then you should definitely review other investments you own that are underwater to determine if you should sell any in order to offset the earlier gain.

Loss Limits — Keep in mind that you can only claim a net loss of $3,000 on your tax return. For example, if you have realized losses of $10,000 and gains of $2,000, you have a net loss of $8,000. You are limited to deducting only $3,000 of this $8,000 loss, but you can carry the unused $5,000 loss over to your 2009 return (and beyond).

Wash Sale Rules — What if you decide to sell an investment in order to claim the tax loss, but really like the future prospects of the investment and want to buy it back again? That is fine, but be watchful of the "wash sale" rules. If you buy back the same investment within 30 days of selling it, the loss is "washed out" and you are unable to claim it. If you are concerned about being out of a particular investment for the 30-day period, there are ways of buying somewhat similar, but not identical, investments in order to still participate in any market movement.

Lower Capital Gain Rate in 2008 — In 2008, for those in the 15% regular federal tax bracket, there is a zero tax rate (that’s right — zero) on long-term capital gains. This tax-saving provision applies to those with taxable incomes below: $65,100 (joint return); $43,650 (head of household); or $32,500 (single). Currently, this zero capital gains rate is scheduled to be in effect for 2008, 2009 and 2010. However, with the new administration in Washington, I wouldn’t count on it. If you are within the income limits, be sure to examine your portfolio to see if you have any investments that might be sold to take advantage of this zero tax opportunity. Keep in mind that state taxes would still apply.

Postpone 2008 Income — If you are self-employed or have any control over when you receive bonuses or other compensation, consider postponing some 4th quarter 2008 income until 2009.

Accelerate 2008 Deductions — To the extent possible, consider accelerating any business or personal itemized deductions into 2008 instead of waiting until 2009. Self-employed individuals should also consider acquiring any needed capital assets, such as furniture or equipment, in 2008 and expensing them under Section 179.

Home Improvements — If you are thinking of making energy saving improvements to your home, such as putting in extra insulation or installing energy saving windows, wait until 2009. This credit expired in 2007, and was reinstated by the Emergency Economic Stabilization Act of 2008 — but only for the years 2009 — 2016.

NC Estimated Tax — If you make state estimated tax payments, consider making your final NC estimated tax payment prior to 12/31/2008, instead of waiting until the 1/15/2009 due date. This will allow you to claim an itemized deduction for this state income tax payment on your 2008 federal return. Caution: If you are subject to AMT in 2008, don’t do this, as AMT will cancel out the benefit of this deduction.

Retirement Contributions — Make sure you are contributing the maximum to your IRA and your employer’s 401(k) in 2008 and review your elections for 2009. Self-employed individuals should consider establishing or contributing to their business retirement plan. IRA contribution limits are $5,000 for 2008 and 2009 ($6,000 if 50 or older.) 401(k) contribution limits are $15,500 for 2008 ($20,500 if 50 or older) and $16,500 in 2008 ($22,000 if 50 or older).

Family Gifts — You can gift up to $12,000 ($13,000 in 2009) each year to an unlimited number of individuals without any gift tax implications. Note that by splitting their gifts, a husband and wife can double this amount to $24,000 ($26,000 in 2009). Also, beginning in 2008, North Carolina will no longer have a gift tax — so if you are contemplating any large family gifts, wait a few weeks.

IRA Charitable Donations — If you are 70 ½ or older, and own IRAs (or Roth IRAs), and are thinking of making a charitable gift before year-end, arrange for the gift to be made directly from your IRA. The Emergency Economic Stabilization Act of 2008 extended this popular provision for 2008 and 2009.