Capital losses are fully deductible against capital gains and up to $3,000 of ordinary income. Excess losses may be carried over and deducted in future years, subject to the same limitations. How can you use these rules to your advantage on this year’s return?

Put losses to work. If you have capital losses on 2009 investment transactions or losses from earlier tax years that you are carrying forward to 2009, check your portfolio for appreciated securities you’d like to sell. Consider realizing enough capital gains to utilize your losses.

Cut your losses. If you have capital gains from 2009 transactions but not enough losses to offset them, review your portfolio for securities that are showing paper losses. If their future prospects don’t look promising, consider taking at least enough losses that would offset your excess gains.

Keep in mind, however, that taxes are just one factor to weigh in making investment decisions.