Sure, federal tax rates on income, capital gains and dividends were cut this year, but taxes are still a vile and onerous burden.

So before the holidays start to dominate your life, take some time to make sure you’re doing all you can to cut your tax bills for this year and next.

This is the time of year, for example, that employees are offered a chance to sign up for flexible spending arrangements that offer big tax deductions for health bills and dependent-care costs.

With an FSA, money is deducted from your paycheck and put in an account that will reimburse you for qualified expenses. The deduction is subtracted from your taxable income, reducing your income tax.

A participant in the 28 percent tax bracket, for example, would save $1,400 in income tax by putting $5,000 a year into an FSA.

There is a drawback, though: Money put into an FSA must be spent for an approved purpose by the end of each year or it is forfeited.

Because of that, FSAs have been more popular for dependent care, since those expenses are easier to predict than health-care costs.

But medical FSA became more attractive after the IRS ruled in September that these accounts can be used for over-the-counter medication, not just prescription drugs. The funds also can be used for co-payments and deductibles, costs that are going up for many employees.

With the over-the-counter ruling, an employee who is not spending all her FSA funds by year-end could stock up on cold medication, bandages and other items, though vitamins and other nonmedical health products do not qualify for FSA claims.

A tip for two-income households: If one of you makes more than $87,900 and the other less, have the lower-paid spouse use the FSA if possible. That’s because all of that person’s FSA contribution also will help reduce Social Security and Medicare taxes. Those taxes are not charged for income above $87,900, so the higher-income spouse can’t get quite as large a tax saving.

The dependent-care plan can be used for day care for children, including before- and after-school programs, and for some adults, such as parents who depend on you.

The rules for both kinds of FSAs are tricky, and employers can impose their own rules on top of the federal ones. Your benefits people at work will have the details.

This also is the time of year employees are offered a chance to sign up for 401(k) plans or to change the amount they contribute.

Despite the tax-rate cuts enacted last spring, 401(k)s remain a good deal. I’ve talked about these quite a bit recently, so I’ll hit just the highpoints.

Money you contribute to a 401(k) is deducted from your taxable income. Putting in the maximum permitted, $12,000 a year, would, thus, cut your tax bill by $3,360, assuming a 28 percent tax rate. People older than 50 can invest another $2,000 a year.

That’s reason enough to contribute, but in addition, many employers match all or part of the employee’s contribution — and you pay no tax on that, either.

The downside: Your employer may have lousy investment options, and you generally can’t take your money out before turning 59 1/2 without triggering a tax bill and 10 percent penalty.

But if you need to save for retirement, at least put enough into your 401(k) to get the full employer match.

As the end of the year approaches, investors should consider selling investments that have lost money — assuming they’re not poised for a rebound.

Selling an investment for less than you paid for it enables you to “realize” a loss that can be used to offset profits earned on other investments sold during the year.

If your realized losses exceed your realized profits, up to $3,000 of the excess can be used to reduce your ordinary taxable income, thus cutting your income tax. Any losses above $3,000 can be carried forward to cut taxes on investment profits or ordinary income in future years.

Remember, though, don’t sell losers just to save taxes — make the investment decision first. Each investment should be evaluated based on what you think it will do in the future, not what it has done in the past.

You have until April 15, 2004, to make an IRA contribution for 2003. But generally, investing earlier means getting more compounding.