There are many tax planning strategies that can be used to reduce or defer income taxes, but most of them fall into one or more of the following categories:
- Shifting deductions to a year when you’ll be in a higher tax bracket.
- Shifting income to a year when you’ll be in a lower tax bracket.
- Shifting income to family members or entities such as corporations that are in a lower tax bracket.
- Investing in tax exempt securities.
- Using qualified tax shelters to defer income taxes.
- Structuring expenses so they will be deductible and still contribute to your living standard.
Professional tax advice about which strategies are best for your individual situation is the best way to keep your taxes as low as possible.