Tax Collectors At Work (Painting Credit: Marinus von Reymerswaele

You’ve got two months left for tax tricks. The objective is to either lower your taxable income or push it into lower brackets. One item on my list has to do with lowering estate taxes.

There are two ways to reduce your taxable income: increase your itemized deductions or reduce your adjusted gross income. A lowering of AGI is more powerful because the AGI is used to figure all kinds of benefits, like college tax credits and personal exemptions.

1. Kick up your 401(k) contribution . If withholding from your paycheck has been lower than it could be, talk to your plan administrator about making a one-time catch-up. Your annual maximum is $17,500, or, if you are at least 50, $23,000. These “elective deferrals” come on top of whatever the boss is putting in for you.

This powerful tax dodge lowers your AGI.

2. Contribute to a Health Savings Account . High-deductible insurance plans permit the employee to chip in; for family coverage, the maximum total contribution (employer plus employee) is $6,450 a year. If you are 55 or older, add $1,000.

By paying out-of-pocket medical expenses via the HSA, you accomplish two things. First, you get around the limits on medical deductions, which are so tight that most people can’t deduct medical costs at all. Second, you lower your AGI.

3. Sell stinker stocks . The game here is to sell losing investments to get the capital loss deduction, while letting winners ride. You can cry poor to the tax collector even though your overall portfolio is doing well.

Some people hesitate to sell because of the “wash sale” rule, which says you can’t claim a capital loss on stock X if you get back into X within 30 days. They are worried the stock will rebound while they’re on the sidelines.

Here’s a cure for those worries: Diversify your loss harvesting. If you have six losing positions, A through F, sell A, B and C, and use the proceeds to double up on D, E and F. After 31 days, sell the original (high-cost) lots of D, E and F and use that money to reestablish your positions in A, B and C.

Capital losses lower your AGI up to the point where they top capital gains by $3,000. That is the maximum net loss you can claim in any one year.

If you would otherwise have reported gains of $12,000 for 2013, but manage to harvest $14,000 of losses next week, then the harvest lowers your 2013 AGI by $14,000. If you previously had $12,000 of gains and now harvest $140,000 of losses, you’ll lower this year’s AGI by $15,000 (the gain/loss entry goes from +$12,000 to -$3,000) and you’ll have a $125,000 loss carryforward to use in future years.

4. Do a bond fund swap . If you had the misfortune to buy a long-term bond fund a year ago, it’s under water now. Grab a capital loss deduction. It’s easy to honor the 31-day wash sale without taking the risk of being whipsawed while you wait. You do that by switching into a similar (but not identical) fund. If you are down 10% on the Vanguard Long-Term Government Bond Index fund (VLGSX), you could switch to the Vanguard Long-Term Treasury fund (VUSUX).

If your intermediate-term tax-exempt fund is doing badly, you could switch temporarily, or permanently, into a blend of short-term and long-term muni funds.

Bond swaps work best with no-load funds, but they also can make sense for exchange traded funds. With the ETF, your transactions are not free, but they are pretty cheap: You’ll be out some $8 commissions and bid/ask spreads. The iShares ETF covering the bond market, ticker AGG, is similar but not identical to the Vanguard product, ticker BND. You can swap from one to the other without triggering the wash sale rule.

The great battle between investors and the IRS over which ETFs are “substantially identical” has yet to be fought. I think the IRS would win if someone swapped two S&P 500 funds and tried to claim a loss (SPY for VOO), because their positions match. Taxpayers will win if the AGG-BND swap is challenged. These portfolios are close to identical in economic effect (they are mostly Treasuries, with an average duration of five years) but the positions do not match.

Are you losing money on a gold position? You can probably take a loss on a bullion ETF and get right back in because the IRS views these ETFs as “collectibles,” not “securities,” and the wash sale rule applies only to “securities.” Good news for underwater GLD holders.