What are the different forms of tax avoidance?

Tax avoidance is a strategy used by individuals and businesses to reduce their tax liabilities. It is done legally by taking advantage of tax rules, regulations, exemptions, deductions, credits, and other allowances. In Maryland, there are several forms of tax avoidance. The first is deductions. Deductions lower taxable income by allowing taxpayers to subtract certain expenses from their taxable income. Examples of deductions include work-related expenses, child care costs, retirement savings contributions, charitable donations, and home office costs. Another form of tax avoidance is exemptions, which reduce taxable income by exempting certain types of income from taxation. In Maryland, taxpayers are eligible for exemptions such as dependency exemptions for dependents, standard deductions, and the earned income tax credit for low-income, working individuals. The third form of tax avoidance is credits. Credits reduce taxable income by reducing the amount of tax due. In Maryland, taxpayers can benefit from credits such as the earned income tax credit, the renewable energy credit, the incentive tax credit for small businesses, and the long-term care credit. Finally, there is deferral of income. Income deferral postpones the taxation of income until a later period. In Maryland, taxpayers can do this by contributing to a retirement plan or by investing in a deferred annuity. In conclusion, there are several ways in which taxpayers in Maryland can legally reduce their taxes. These include deductions, exemptions, credits, and deferral of income. By making use of these strategies, taxpayers can reduce their tax liabilities and maximize their after-tax income.

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What are the different forms of tax avoidance?

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