Now that the markets have started to show some signs of life, it's safe—prudent even—to revisit those portfolios and start thinking about gains. This year there are many competing considerations involved in this decision-making process.

We'll get to taxes in a moment, but let's first deal with the more important economic considerations. Where is that stock/mutual fund/bond going from here? Is there more upside? If so, how much more? And when will that upside finally show up?

If your client has a $10 long-term gain on a stock, the additional income tax between 2010 and 2011 is about 5%. So taking the gain early could save him about 50 cents. A price increase of 50 cents easily wipes out the tax difference. The trading range of many stocks exceeds this per day. So all things considered, taking gains early for tax reasons is probably worthwhile as long as there is upside in the stock. Note that the bigger the gain, the greater the price rise necessary to offset additional income tax. A $100 long-term gain on a stock (you wish!) translates into a $5 stock price difference.

This speculation about future prices is even more important if your client has not held the stock for a year. Short-term capital gains—on stocks/bonds that you have held for less than a year—are currently taxed at the client's regular federal marginal tax rate (up to 35%). Perhaps holding on until 2010 will put her in long-term capital gain territory-in which things owned for more than a year (even if just by one day) are long-term gains/losses—and subject only to a maximum federal rate of 15%.

How to manage gains related to bonds is probably an easier question. No need to sell now for tax reasons, but with interest rates at an all-time low, can there be much more gain potential in medium- or long-term bonds?

Now, about those taxes. First, look back to your client's 2008 income tax return. If she's like most people, she has created a healthy capital-loss carryover. Those capital losses from 2008 can be carried forward to be used against future capital gains forever (well, really it's only until she dies). She can use $3,000 of capital losses against other income each year if the net capital gain/loss result is a loss.

So you need to tell your client to check line 16 of her 2008 Schedule D. Reduce that loss by $3,000 and there's her carryover (take $3,000 off the loss—i.e., subtract a negative from a negative). Some software packages will actually print out a sheet showing short- and long-term capital-loss carryovers.

Now you know how much capital-loss carryover is available for 2009. You can take capital gains up to this amount and pay no additional income tax. The ordering rules are: You first net short-term gains against short-term losses and net long-term gains against long-term losses. Then you net the net short against the net long.

Your client then needs to check her state income tax rates to see if they've been raised for 2009. Most states do not distinguish between types of income, so those have no special capital gains tax rates. If the tax rates have already gone up-well, that's too bad. Start thinking about state income tax rates for 2010. Is your home state likely to raise rates in 2010? This is hard to say, so just include it in the unknown factor portion of the decision tree.

Now we come to the easy part. Maximum federal tax rates on long-term capital gain are scheduled to stay at 15% through the end of 2010. They are not scheduled to go back to 20% until 2011. The Obama tax proposals do not change the timing or the rate. So it looks like taking capital gains in 2009 to avoid a federal tax increase is not necessary. However, you should be monitoring your portfolio during 2010 and be ready to harvest gains then. Will we have a rush of tax-motivated selling toward the end of 2010? The answer is a clear maybe: If markets are up, yes; if markets are down or stagnant, no.

Remember that collectibles (gold coins, art, automobiles, etc.) are taxed at 28% and that rate has not changed in years. If you are thinking about collectibles, the tax rate is an afterthought. Also remember, tax rates don't drive economic decisions. They can be an excuse or they can be a tiebreaker. Between 2009 and 2010, chances are that there will be no increase in tax rates on long-term gains. Even a rate increase between 2010 and 2011 may not justify selling if there's still a chance for upside on the security.