With 2018 rapidly winding down, now's the time to tackle the financial tasks you've been putting off for the past few months. Here are four crucial moves to make before the year closes out.
1. Get your full 401(k) match
An estimated 75% of companies that sponsor 401(k) plans also match employee contributions to varying degrees, yet roughly 20% of participants don't put in enough of their own money to fully capitalize on that free cash. If you have yet to contribute enough to your 401(k) to snag your full company match, now's the time to get moving -- especially since at this point, you might only have one additional paycheck from which those funds can be deducted.
Making a last-minute 401(k) contribution will also help lower your 2018 tax bill, provided you're saving in a traditional 401(k) and not a Roth. If you sneak in an extra $500 between now and year's end, and your effective tax rate is 24%, you'll lower your 2018 taxes by $120, just like that.
2. Use up your FSA
These days, many flexible spending accounts (FSAs) let participants roll unused funds into the next calendar year, or give them extra time to spend down their balances. But if your plan doesn't have such a provision, you'll need to use up your FSA by the end of the year to ensure that your balance doesn't go to waste. Be sure to read up on your account's rules, and if necessary, pre-order medications or load up on approved over-the-counter medical supplies, like contact lens solution and bandages, to use up your leftover funds.
3. Take some losses in your portfolio
If your traditional brokerage account is housing stocks or other investments that are underperforming, selling them off at a loss before the end of the year is a great way to reduce your taxable income, while potentially freeing up some cash for more lucrative investments to take their place. Whenever you take a loss on an investment, it can be used to offset similar gains. For example, if you take a $4,000 loss on a loser stock but made $4,000 by selling other stocks at a profit earlier in the year, that loss will wipe out your gain, thereby letting you off the hook for capital gains taxes.
Furthermore, if your losses exceed your gains for the year, you can apply up to $3,000 of them to cancel out ordinary income. This means that if you take a $4,000 loss but only have $1,000 in gains to show for, the remaining $3,000 can offset $3,000 of your regular job earnings.
4. Sneak in some charitable contributions
Now that the standard deduction has virtually doubled from 2017, it's estimated that fewer taxpayers will be itemizing on their 2018 returns. But if you have just enough deductions to make itemizing worthwhile, it pays to make a few last-minute contributions to the charities that mean the most to you. Best of all, you don't have to donate cash to get a deduction for charitable contributions; if you donate goods to a registered organization, you can deduct their fair market value on your return, thereby lowering your taxes.
When you're busy buying gifts and planning holiday parties, money matters can easily take a backseat. But don't neglect these financial moves in the coming weeks. If you do, you might regret it once the new year kicks in.
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