Tax Avoidance

## Tax Avoidance

Tax avoidance is the legal reduction of tax liability through permitted means. It is distinct from tax evasion, which is illegal.

### Common Strategies

- Maximizing retirement contributions (401(k), IRA, pension).
- Charitable giving and donor-advised funds.
- Tax-loss harvesting in investment portfolios.
- Using tax-advantaged accounts (HSA, FSA, 529 plans).
- Timing income and deductions across tax years.
- Choosing between standard and itemized deductions.

### Corporate Strategies

- R&D tax credits.
- Accelerated depreciation.
- Intellectual property holding structures.
- Transfer pricing optimization.

### Legal Boundary

The line between aggressive tax avoidance and evasion can be gray. General Anti-Avoidance Rules (GAAR) in many countries allow authorities to challenge arrangements that comply with the letter but not the spirit of the law.