Investors have been well trained to avoid taxes whenever possible. Yet one strategy that may ordinarily seem like a dumb move may be exactly what you need in order to make the most of a year-end opportunity -- but you only have until Thursday to act.

The one tax that you control
When you invest, you face a number of tax-related factors that you have no control over. Investing in mutual funds, for instance, leaves you at the mercy of fund managers whose purchases and sales of stocks can generate tax liability that gets handed to you at the end of the year in the form of capital gains distributions.

Similarly, shareholders of dividend-paying stocks typically look forward to the quarterly payments they receive. Yet even though it's hard to complain when companies like Mosaic (NYSE:MOS) and Dish Network pay out special dividends to shareholders, it can increase your taxable income, thereby potentially complicating your tax return in a number of ways.

But the one thing you do control when it comes to taxes is when you decide to sell your individual stocks. One of the most powerful things you have going for you as a long-term buy-and-hold investor is the fact that as long as you hold onto your shares, you don't have to pay any taxes on your paper gains -- no matter how big they are. That gives you many of the same advantages that tax-advantaged retirement accounts like IRAs give you -- but without the restrictions and lack of access that those accounts impose.

An even bigger bargain
Ordinarily, the best way to capitalize on that advantage is simply not to sell your stocks. That way, you don't have to worry about recognizing that gain on your tax return.

But sometimes, opportunities arise where you actually want to put that gain on your tax return. For many taxpayers, now is one of those times.

Most people have heard that capital gains get preferential treatment under the tax laws. But there's an even bigger break for some taxpayers. Last year, a new 0% rate took effect on long-term capital gains for certain taxpayers. If you are in the 15% tax bracket or lower, then at least a portion of your capital gains may be eligible for the 0% rate.

Here's how it works: If your taxable income -- which is the total amount of income you had minus all your deductions and exemptions -- is under the maximum threshold for the 15% bracket, then you can recognize gains up to the amount that you're under the maximum. For instance, if you're $10,000 under the maximum, then you get 0% treatment for up to $10,000 in gains.

Taking stock
That can save you plenty. As an example, say you'd bought these stocks at last November's lows and sold them today:


Price 11/20/2008

Price 12/24/2009

Tax Savings on 100 Shares

Goldman Sachs (NYSE:GS)








Dow Chemical (NYSE:DOW)




Las Vegas Sands (NYSE:LVS)




Caterpillar (NYSE:CAT)




Research In Motion (NASDAQ:RIMM)




Dynamic Materials




Source: Yahoo! Finance. Tax savings assumes that 15% maximum capital gains rate would otherwise apply.

Since you've held these stocks over a year, any of them would be eligible for long-term capital gain treatment. And if you have enough room under the maximum 15% bracket figure, then all of these gains might qualify for the 0% tax rate.

Of course, that last part is a big if. The 25% bracket starts at $67,900 for joint filers and $33,950 for singles. If you inadvertently generate so much in gains that you pull yourself into the 25% bracket, then the regular 15% maximum capital gains rate will apply to the excess gain.

Use it or lose it
Nevertheless, the opportunity to pay absolutely nothing in tax is both rare and valuable. With the likelihood of higher taxes in the near future, anything you can do to take advantage of a temporary tax break like this one is worth the effort. And if you like those particular stocks, you can just buy them right back -- there's no wash sale rule on taking gains.

So take a break from the post-holiday sales and take a look at doing some selling of your own in your portfolio. The money you save will make you glad you did.

Want to know more about options? Check out this introduction to the subject, which will show you all the resources the Fool has to offer on useful investing strategies.