7 smart money moves to make before 2018 — to end up richer in the new year

Stressing about money as you make your holiday gift list — and shell out hundreds of dollars for holiday travel? While it’s easy to overspend in December, you don’t have to let the holidays gut your finances.

In fact, now is a great time to make some smart money moves that will set you up for a financially secure 2018. “It’s never too early to gather receipts for tax deductible expenses and sources of income,” Lisa Greene-Lewis, a certified public accountant and tax expert at Intuit said in an interview. “Doing it now will help you ensure you’re not forgetting anything significant and help you see a better snapshot of your finances ahead of the new year.”

But getting your paperwork together for the IRS is just one of many steps to take before heading out for your New Year’s Eve celebrations if you want to make sure your finances are on track in 2018. And while President Donald Trump’s tax reform plan already passed in the House of Representatives, even if it passes in the Senate as well, the changes won’t take effect until the 2018 tax year. So you can’t use that as a reason to procrastinate.

Here are seven key things to take care of before the end of the year.

1. Get those documents organized

Even if you do your own taxes online, you still have to contend with a mountain of paperwork to prove to the IRS that you’re actually entitled to all those deductions and credits that you’re claiming. “Taxpayers should make sure that all relevant tax return documents are handy and up to date,” David Elijah, director of tax education at TaxSlayer said in an interview.

While many forms you need to do your 2017 taxes are not sent out until early 2018, you can begin gathering certain documents including 1099s sent to you throughout the year, documents proving business expenses; cancelled checks or receipts from charitable donations; and receipts for health insurance and premiums paid.

You may also have experienced out-of-the ordinary life events in 2017 that you’ll need proof of to get one-time deductions and credits. That includes things like deductions like moving for a job, job search expenses and charitable donations. Now’s the time to dig out your receipts, credit card statements and record of miles traveled to make sure you can claim every single tax break that’s coming to you.

Getting your paperwork in order before the end of the year will make it easy to claim your refund as soon as possible. The average tax refund in 2016 was more than $3,000. “For many that’s the biggest paycheck they see all year. You want to be ready and have your documents ready so you can file early and be closer to your tax refund,” Greene-Lewis said.

As the year comes to an end, start looking out for documents that will arrive early in 2018, like your W-2 for wages, your 1099s for investments and your 1095-A if you got health insurance from one of the marketplaces established as part of the Affordable Care Act.

2. Slash your taxable income by thousands of dollars with this simple move

One of the biggest tax breaks you can get is a deduction if you save for retirement. “You can take a dollar for dollar reduction in your income and also save for the future,” according to Greene-Lewis.

You can contribute up to $18,000 to your 401(k) in 2017 according to the IRS, but contributions need to be made on or before Dec. 31, so if you haven’t maxed out, it’s not to late to start diverting as much cash as possible from your paychecks for the rest of the year into your 401(k).

You can also put up to $5,500 into a traditional for 2017. A traditional IRA allows you to contribute with pre-tax funds — meaning your taxable income is lowered dollar for dollar by the same amount you sock away. One caveat: you may not be able to deduct the full amount you contribute to your IRA if you are also covered by your company’s 401(k).

Investing in a traditional IRA is an especially great way to cut your taxes if you would otherwise owe money to the government on tax day. “The money may be ‘tied up’ for a few years (until age 59.5), but the money will be yours instead of going to the government,” Elijah said.

With a Roth IRA, you are also limited to a $5,500 contribution, but since you are putting after-tax dollars in your account, you won’t get a tax break on your 2017 returns. Why bother? Because all future earnings on your initial capital are tax free when you withdraw them decades from now.

Finally, if you’re self-employed, you can invest as much as 25% of your compensation or $54,000 in a SEP IRA for 2017.

While 401(k) contributions have to be made before the new year, you actually have until tax day in April to contribute to any IRA.

3. Nab these tax credits and deductions while you still can

The best part about thinking about your taxes now is that it’s not too late to get even more breaks before you ring in 2018. A simple way to cut your 2017 tax bill is by making charitable donations before Dec. 31 so you can deduct for them when you file your taxes next year, provided you itemize your deductions.

Next, if you’ve been contemplating the purchase of an electric car and want to claim a tax credit between $2,500 and $7,500, consider purchasing before the end of the year as this credit may be eliminated if the tax reform bill passes.

If you are footing the bill for college tuition, prepaying for next semester’s courses (before Dec. 31) will help you take advantage of the American Opportunity Tax Credit, worth up to $2,500, or the Lifetime Learning Credit, worth up to $2,000.

Own a home? Prepaying property taxes in December that are due early in 2018 allows you to include those payments on this year’s itemized deductions.

Prepaying makes a lot of sense if you otherwise don’t have enough deductions every single year to add up to more than the standard deduction. You can claim all of your itemized deductions during one tax year to get the biggest possible deduction, then take the standard deduction the next year.

4. Take care of your health and get a sweet tax break

If you have a Flexible Spending Account at work and you contributed to this account to pay for healthcare with pre-tax dollars, you could lose the contributed money if you don’t spend it before the year’s end. While employers have some options to allow you to carry over unused FSA funds until next year, many accounts are use-it-or-lose-it. This means you need to spend the money before 2018 or it will be gone forever.

You can use your FSA on a number of medical products as well as on receiving care. Options to spend your funds: stock up on birth control or other prescription meds you pay for out-of-pocket; get an eye exam and glasses; or go see the chiropractor or acupuncturist.

If you’ve met your healthcare plan deductible for the year, try to get as much care as you can before your deductible resets in January if you’re on a calendar year plan. You should also make sure you’ve taken advantage of any free preventative care available to you for this year, like getting an annual exam or a flu shot.

And, if you’ve spent 10% or more of your income on medical expenses this year, you’ve reached the threshold to deduct those expenses. Get your documents in order to prove you’re entitled to the deduction, and get as much care as possible before Dec. 31 while you’re still eligible to deduct your spending. This tax break could go away next year if tax reform passes, or you may not hit that 10% threshold, so take advantage of the tax break while you can.

5. Harvest your tax losses

If you got lucky with your bitcoin investment this year or made any money on investments, you might owe capital gains taxes. But, if you experienced any investment losses, those can offset your gains — provided you sell the losing assets before the end of the year.

With the Dow hitting new highs in 2017, there’s a good chance you have some capital gains you’ll want to offset. And unlike IRAs, which you can contribute to all the way up until tax day, your investment transactions need to settle by Dec. 31, so it’s wise to start culling your losers ASAP.

6. Explore your 2018 benefit options

If you have investments that didn’t perform well that you’ve been meaning to get out of, now is the time. You can use the losses to offset capital gains or even deduct up to $3,000 per year from your ordinary income.

If your employer offers an open enrollment period at the end of the year, now is the time to evaluate your benefit options. This could mean reviewing your health insurance coverage to see if you need to make a change to the plan you’ve chosen.

Most employees overpay by as much as 24% for their health insurance by not choosing the plan that best reflects their spending needs, according to a recent study from the Quarterly Journal of Economics. Consider how much health care you used in 2017 and estimate your needs for 2018 to pick the right plan for you.

If you don’t have health insurance through your employer, make sure you sign up for a plan through the marketplace exchanges by Dec. 15, 2017. Missing this deadline could mean you have to go an entire year without insurance and pay a tax penalty unless you have a qualifying life event, like a job loss or a move, that entitles you to sign up outside of open enrollment.

7. Get your financial house in order

The end of the year is a great time to take stock of your financial situation, get organized and set goals for yourself in the new year.

Before 2017 draws to a close, take the time to rebalance your investment portfolio and make sure you’re not paying really high fees that could eat away at your investment gains.

As you’re looking forward to your tax refund, you may also want to update your withholding information with your employer so you’re no longer giving the government an interest-free loan. Getting the refund may feel good, but you’re missing out on money that you could be using throughout the year.

Finally, you can also give yourself a general financial checkup and set some goals for 2018, whether that means finally starting to invest in the stock market, improving your credit or finally getting on a budget. Whatever your hopes are, a new year is a great time to get on the right path financially, so get your plans underway before it’s time to make your New Year’s resolutions on Jan. 1.

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