Tax Avoidance

外汇网2021-06-19 14:16:44 63

The use of legal methods to modify an inpidual's financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This practice differs from tax evasion, which is illegal.

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Watch: Tax Avoidance Vs. Tax Evasion

Most taxpayers use some forms of tax avoidance. For example, inpiduals who contribute to employer-sponsored retirement plans with p-tax funds are engaging in tax avoidance because the amount of taxes paid on the funds when they are withdrawn is usually less than the amount that the inpidual would owe today. Furthermore, retirement plans allow taxpayers to defer paying taxes until a much later date, which allows their savings to grow at a faster rate.

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