What are the different forms of tax avoidance?
Tax avoidance is a legal way to reduce or minimize taxes owed. There are various forms of tax avoidance, some of which are common in Washington. One of the most common methods of tax avoidance is through income tax deductions. This involves claiming deductions on income taxes, such as for charitable donations or mortgage interest payments. These deductions reduce the amount of income subject to taxation. This is a common way to reduce taxable income in Washington. Another way to avoid taxes is through deferment. Deferments involve delaying taxation until money is received or revenue is earned, such as through an inheritance or by investing in retirement funds. Deferring taxation is often a way to avoid paying taxes on certain income, although in some cases, taxes must eventually be paid. Tax credits also provide an option for tax avoidance. Tax credits provide a dollar-for-dollar reduction in tax liability, so they are a great way to reduce the amount of taxes due. For example, the Earned Income Tax Credit in Washington offers a tax credit to low-income earners. Lastly, tax structuring is an option for avoiding taxes. This involves taking advantage of different tax rules to minimize taxes due. This could include setting up a business in a lower-tax jurisdiction or taking advantage of tax havens. Overall, tax avoidance is a legal way of reducing taxes. There are several ways to do this, including deductions, deferment, tax credits, and tax structuring. It is important to note, however, that in some cases, taxes must still be paid eventually.
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