By Dana Anspach via Iris.xyz

Why is it, every year after Thanksgiving, we are “shocked” to find that we are hurtling towards December 31st?

As busy as it may get at year-end, make a promise to yourself. Find a way to steal two hours from your day to focus on something that will help you save money before heading into 2019. Sit down and estimate your 2018 taxes.

Once December 31st passes, there is almost nothing you can do about your tax bill. A little planning now goes a long way.

When you project what your tax return will look like BEFORE the year ends, you can identify ways to do all of the following:

1. Harvest losses that reduce your tax bill

December 31 2018, is the deadline to “harvest” tax losses if you want to use them to reduce your 2018 tax bill. Harvesting a loss means you will sell investments that have decreased in value and the same day exchange them into a similar investment. By doing this, you capture those losses on paper so they are reported on your tax return, and thus help decrease your income tax bill. This strategy does not work for investments owned inside of a retirement account – only for investments that you own in a brokerage account or other account that is not an IRA, 401(k) or another type of retirement account.

The equity market was pretty strong earlier in 2018 but got more volatile in the last quarter. And some asset classes, like emerging markets, had a bad year. Go through your investment holdings and see if there are things you own that are worth less than what you paid for them. This is called an “unrealized capital loss.” Once you sell the investment, you realize the loss and it will be used to offset any capital gains. (Technically the way it works is short-term losses are first deducted against short-term gains, and long-term losses are deducted against long-term gains. Net losses of either type can then be deducted against the other kind of gain.)

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