Taxes are certain, just like death. We will always have to pay them, and no one enjoys doing so.

However, thanks to how complex the tax code is there are loopholes and ways to minimize how much is paid. Look at businesses for example. They have teams that look at minimizing how much they pay and what they can write off as a business expense.

As an individual it is slightly different. There are different rules and categories depending on your situation.

Lucky for you, in this article we will highlight some of the ways you can minimize the impact taxes have on your finances.

Skipping an RMD

While the pandemic has done nothing but slow economic growth and halt activities, there are a few silver linings.

The first is thanks to the CARES Act, you can skip your annual RMD or Required Minimum Distribution.

By doing this, you can lower your income and income taxes.

Depending on how much you are receiving, this can lower your tax bracket and save you a solid amount.

Donating

This may not have a huge impact, but you can take some of your money and donate to various charities.

As a result, you can write off those donations which can help your tax situation.

It may not be directly related to income taxes, but it still helps at the end of the day.

Make Contributions to your Retirement Account

If you are not utilizing your retirement account now may be a good time to start.

When you contribute to a 401(k) or IRA, as long as the account isn’t a Roth, you are using pre-tax dollars.

You will be taxed at the time of distribution, which ties back to the first topic of skipping an RMD.

After your money is contributed to an account, then taxes are taken out and calculated.

There are contribution limits on these accounts, but if you are right on the edge of a bracket this is a great way to help keep you from bumping up.

Itemize versus Standard

Deciding which tax method to use varies greatly on the individual. If you are a family that has children and other activities, you may save more on itemizing your taxes.

Depending on the situation, you may be able to write off many items, which lowers your tax bill at the end of the year.

If you are someone who is single, just out of college, it may not be worth the time itemizing your taxes.

Odds are it is very straight forward and not much is worth deducting.

With COVID-19 and the government attempting to spur economic growth, look for additional tax adjustments that benefit you.

Understand the various tax brackets and where you are within them.

Lastly, audit your financial situation and see where you can begin storing money, pre-tax.

If you need some assistance, always ask an accountant. At the end of the day, ensuring your taxes are paid in full is priority number one.

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