If your income other than gains and dividends is in the 10% or 15% bracket, profits on sales of assets owned for over a year and dividends are tax free until they push you into the 25% bracket. That bracket starts at $72,500 of taxable income for couples and $36,250 for singles. The balance of your long-term gains and dividends is taxed at 15% or possibly 20%. If part of your gains and dividends is taxed in the 0% bracket and the balance is taxed at a higher rate, claiming additional itemized deduction or making a deductible IRA pay-in give you two tax breaks: The income tax savings from the deduction. Plus, more gains and dividends will be taxed at the 0% rate.

(Kiplinger 9-27-13)