There are Three Cardinal Rules For Reducing and Minimizing Taxes:

• Recognize income (and pay the tax) when your Tax Bracket is lower.
• Pay deductible expenses when your Tax Bracket is higher.
• Minimize and postpone taxes whenever possible.

It was Ben Franklin who said “Certainty? In this world nothing is certain but death and taxes.” Another truth is: Tax Planning will help you postpone (if not avoid) paying taxes. Generally speaking, Tax Planning includes different techniques such as minimizing and/or postponing your income, finding/planning and claiming deductions and maybe even accelerating your income (tax-free) to take advantage of too many deductions. So let us remember that each Tax Payer situation is unique, that one size does not fit all and that all of these ideas will not apply to any one particular Tax Payer. The trick is to find all of the Tax Planning techniques that can specifically apply to you.

Initially, Tax Planning requires that you become aware of your potential Taxable Income and where you are in your Tax Bracket. Towards the end of each tax year people should “check in” on their tax situation; find out if they are about to enter a higher tax bracket and can it be avoided. Could they possibly drop down into a lower bracket and if so, how? Note: Big shifts in tax brackets are caused by life's big events; marriage, divorce, job changes, retirement, illness and selling your assets (stocks, mutual funds, real estate rentals and/or your home).

CAUTION HERE: You need to know that if the IRS feels you delayed income just to pay less tax they will assign the income to you as being received this year and assess the tax you would have paid. (Yes, they can do that.)

Retirement Plan Contributions are virtually IRS Challenge-Proof and one of the easiest and best ways to postpone taxes on thousands of your current income dollars. Contributions may lower your Tax Bracket as well. Whatever type of retirement plan you might have — maximize your plan contribution. And if you are age 50 or more make those catch-up contributions as well.

For the Cash Basis Self-Employed and Small Business Owners delay year-end Accounts Receivable billing until late enough in the year that payments won't come in until next year.

For those Year-End Bonus wage-earners ask your employer to pay your bonus in January instead of December. Generally your employer can still claim the bonus deduction this year but your bonus income will not show until next year.

For those Non-Accountable Expense Plan, wage-earners who deduct work-related expenses in their Form Schedule-A, 2% Miscellaneous Deductions you are paying too much tax. Ask your employer to implement an Accountable Expense Plan that will allow you to turn in expense receipts and be reimbursed dollar-for-dollar.

• A single person with $6,000 of job-related expenses, earning $70,000 of wages per year may pay as much as $1,000 more in taxes than a single person earning $64,000 in wages who gets reimbursed for $6,000 of expenses from an Accountable Plan.

Much of the Interest income on Treasury Bills and Bank Certificates having a one-year or less term may not be includable in your income until you receive it at maturity (check with provider to be sure). If you have funds in interest-bearing accounts you can delay being taxed on the interest by transferring your funds to these types of holdings.

If you own and trade investment and business properties you may already be aware of the (IRC Section) §1031 Exchange which allows you to defer gain (or loss) on like-kind business real estate trades indefinitely when you trade up in value.

An Installment Sale allows you to receive portions of your sales price on property (other than stocks or securities) you sell in installments over the next few years. This allows you to receive less income this year (and therefore pay less tax) and postpone the rest of the tax you would pay on the full sales price until later on.

“Bunching” refers to the bunching of itemized deductions and relates mostly to Taxpayers whose total itemized deductions pretty much equal the standard deduction from year to year. Bunching results in gaining higher deduction amounts over a two-year period than what would have been claimed if only the itemized deductions had been claimed in each of the two years.

For example, let’s say you are Single and have $5,900 of itemized deductions for 2007 and 2008 ($11,800 for the two years). You would claim your itemized deductions each year because they would be greater than your standard deductions of $5,350 and $5,550 ($10,900 for the two years). But you can increase your itemized deductions further by accelerating deductions you would normally pay next year into this year:

• Pay some (to all) of your 2008 deductions in 2007 to increase your 2007 itemized deductions.
• claim your standard deduction in 2008 (when your itemized will be lower than your standard deduction).
• Repeat every two years.

The idea is to pay your annual medical tests, physical checkups, prescription drugs and deductible insurance costs in January and December of this year (2007) then have no (or greatly reduced) medical deductions in 2008. If you own property you could pay some (or all) of your 2008 property tax payment(s) in 2007. Your major cash and non-cash charity contributions could be donated in odd years and those who have non-reimbursed job expenses could “bunch” them into the odd years.

If you can bunch or accelerate say, $4,000 of 2008 itemized deductions into 2007 you will now have $9,900 of itemized deductions (instead of your original $5,900 in the previous example) for 2007. In 2008, your itemized deductions would be $1,900 ($4,000 less) so you would claim the standard deduction of $5,550.

Taxpayers sometimes get to where their deductions and credits add up to more than then they need for their income. In other words, once your Taxable Income is reduced to zero you might not pay any tax. But you also mighht not have to pay more tax even if you increase your income.

There may also be times when you know you will be in a higher Tax Bracket next year so you may want to claim additional income this year to take advantage of your current Tax Bracket.

Either way you might be able to increase your income without paying any more tax which has the same net effect as lowering your tax on the same about of income. Here are some examples of when you might be able to increase your income without increasing your tax:

• If an upcoming change in Filing Status will increase your Tax Bracket next year you may want to accelerate your income this year to take full advantage of your current Tax Bracket.
• The same applies if your income will be enough next year to increase your Tax Bracket.
• If you have more deductions than you can use with this year's income, you may want to bring in more income to take advantage of those deductions.

Accelerating your income (which the IRS will never complain about) is in many ways just the opposite of postponing your income as shown in the following:

For the Cash Basis Self-Employed and Small Business Owners collect your Accounts Receivable billing in time to show the income in this year instead of next.

For those wage-earners who earn a Year-End Bonus ask your employer to pay your bonus this year instead of next.

Retirement Plan Distributions can give you wide-open choices in controlling your Tax Bracket but exercise caution here to avoid possible age and withdrawal requirement penalties.

Installment Notes can be undone in three ways and all will accelerate your remaining gain into this year:

• Arrange for your debtor/buyer to pay off the note this year.
• Use the note as collateral for a loan.
• Sell the note to a third-party.

If you have control over a corporation that pays Dividends arrange to be paid this year instead of later.

If you have Capital Gains assets that have appreciated in value you can sell some or all of them before the end of the year.

Settling disputes (Lawsuits, Insurance Claims, etc.) and getting paid this year might mean accepting less in settlement income but it might also accomplish your Tax Planning goals.

EE Bonds interest that has been postponed until maturity can be sold in order to claim the interest in this taxable year.