Tax evasion, which involves intentionally hiding income, falsely claiming deductions, or another means of not paying taxes owed, is illegal. Tax avoidance, however, means reducing taxes owed by legal means. For instance, you can reduce your tax liability by

• earning tax-free income from tax-exempt bonds or mutual funds.
• contributing to a qualified retirement account, such as a traditional IRA or 401(k)
• making a charitable contribution.

There are many other ways to legally reduce your tax burden. For instance, consider the itemized deductions for individual taxpayers in the Internal Revenue Code at Cornell University Law School.

For more information on taxes, along with tax calculators, advice, and forms, visit Wallet Pop.

4. regressive tax; It takes a smaller proportion of an income as the income rises.
5. progressive tax; After certain deductions, a larger proportion of the taxable estate is paid in taxes as the value of the estate increases.
6. flat tax; A flat tax rate of 15% is applied to profit of the sale of a stock investment.