Investors sitting on stock losses can legally lower their tax bill before the year ends, which is good news for anyone who made money on some trades and lost money on others.

• The IRS only taxes gains and losses once you actually sell — gains on stocks you still hold don't count yet.
• If you sold a winning stock this year, you can sell a losing stock too and use the loss to cancel out the tax on that gain.
• There's a catch: if you sell a stock for a loss, you can't buy that same stock back for 30 days or the loss won't count for taxes (buying a similar but different company's stock is fine).
• If your losses are bigger than your gains, you don't lose the extra — it carries forward to future years and can also cut up to $3,000 a year off your regular income taxes.
• This has to be done by December 31, which is why most people do it in November or December.

Outlook: Investors with underwater stock positions have until year-end to sell and lock in the tax savings, or they lose the chance for this tax year.