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Run, don't walk, into the high yields and safety of municipal bonds. Which ones? Click here for current buys from Marilyn Cohen in Forbes Tax-Advantaged Investor.

Several times in the first half of 2008, it looked like the Federal Reserve and the Treasury just might be able to pull the U.S. economy and financial markets out of the enveloping funk that began to gather in earnest about one year ago as stocks topped out. As we now know, the pain was just beginning and stocks went on a big slide; the Dow Jones Industrial Average now has a virtual lock on finishing 2008 with one of its five worst annual percentage losses in the history of the index, nestled among Depression-era years and the horrendous Panic of 1907.

Add to the steep slide in the overall market a far more precipitous crash in all things related to commodities and emerging markets and you could be forgiven for getting caught still holding a few losers in your portfolio this time of year--maybe a copper stock, a few Chinese stocks, an oil company or fertilizer maker, or perhaps mutual funds or exchange-traded funds that hold some of these hot investments gone cold. You may have had a massive capital gains distribution this month, or are about to have one, and you'd like to reduce your tax liability.

Now it's time to counter that pain you've felt as an investor with at least a bit of relief as a taxpayer.

Selling out of losing investments inside of a taxable account allows you to realize both short-term and long-term capital losses, which you can use to offset gains for tax purposes. If your losses exceed your realized gains, you can deduct up to $3,000 from ordinary income for the tax year when you booked the loss--and carry forward anything above $3,000 until you die.

But if you want to make sure your losses do some good for you this year, you need to pay attention to something called the "wash sale rule," which disallows a realized loss if you purchase the same, or "substantially identical securities," 30 days before or 30 days after the day you booked the loss.

It is not the end of the world to have a wash sale disallowed: The IRS simply adds back the amount of the disallowed loss to your original basis, in effect lowering your tax burden in whatever year you properly dispose of the investment.

If you were counting on that loss to offset gains you made this year, however, you need to make sure to play by the rules. Section 1091 of the Internal Revenue Code details the wash rule and the IRS lays it all out in Publication 550, available on its Web site.

BURLINGAME, Calif.--Amid the uncertainty of the financial markets, private equity giant Blackstone Group is getting into clean tech. Its first investment: Coskata, an Illinois start-up that says it can make next-generation ethanol from non-food sources for approximately $1 a gallon.

Coskata, which announced the investment Friday, did not disclose how much it raised in its third round of financing, but the company is said to have raised $40 million from Blackstone (nyse: BX - news - people ) and other investors.

Blackstone made its investment through its newly formed clean-tech fund. A spokesman for Blackstone said the company can't comment on the fund because it is still in the fundraising process. But Blackstone announced in August it was creating a clean-tech energy group headed by James D. Kiggen, formerly of investment manager AllianceBernstein (nyse: AB - news - people ).

"We are thrilled to have an investor the caliber of Blackstone working with us," Coskata CEO Bill Roe said in a press release. And lucky, too. The credit crisis dramatically slowed the pace of investment in Coskata, which began its fundraising roadshow in late June and had been hoping to announce the deal with Blackstone two months ago.

Roe added in an interview with Forbes.com that the onset of the credit crisis made the fundraising "a white-knuckler." "We were happy to get [the financing] closed because it was getting more and more difficult," he said. "Several people who were in the book had to get out of the book because they couldn't make a cash call" to come up with the money by the deadline for the fundraising. The problem: the seizing up of the financial markets. Interest is still high in the future of next-generation ethanol, despite the drop in oil prices to $42 a barrel, Roe said.

Coskata is about 80% of the way through building a commercial demonstration plant outside of Pittsburgh. The company hopes to open the plant within six months and aims to have a full commercial-scale production plant up and running by the end of 2011. By then, Roe expects oil demand will return to normal with prices in the $70-a-barrel range.

Most of the so-called cellulosic ethanol companies that Coskata is competing with are pursuing a biotech approach, using enzymes to break down plant mass into fermentable sugars. Coskata, however, is pursuing an approach that doesn't use enzymes. Instead, the plant matter (also called biomass) is gasified, then sent to a proprietary bioreactor where micro-organisms consume carbon monoxide and hydrogen and spit out ethanol.