Defer Your Income

• If you are in a position where you can control how much income you take and when, you can delay receiving income. Since taxes are typically due when the income is earned, putting off earning can put off taxes. One example of this strategy is a small business owner who waits to pull money out of his corporation until Jan. 2, thereby moving his personal income tax liability into that new year.
  
  

Use a Tax-deferred Account

• Tax-deferred accounts are typically used for retirement purposes. In these accounts, you can invest money before taxes are taken out and only pay taxes on the income as well as on the income that it generates when you withdraw it. IRAs, 401(k)'s, 403b's, and other plans all fit into this category. For instance, you could have your employer put $5,000 of your paycheck into a 401(k) when you are 30 years old. It would then grow tax free until you withdrew it in your retirement. At that point, you would pay the income tax on the $5,000 in earned income as well as the tax on the capital gains, interest or dividends that had accrued over the years. This can yield additional savings because most people's tax rates are lower when they retire than when they are actively working and earning salaries.
  
  

Buy Tax-deferred Investments

• Certain investments contain a measure of tax-deferral as well. Your residence is an example. Generally speaking, a house's value goes up over time. If you bought a $200,000 house when you were 30 years old, you can assume that it will be worth significantly more when you are 60. In fact, it should be worth well over twice what you paid for it, based on data compiled by the National Association of Realtors. During the 30 years that you lived in the house, you did not have to pay taxes on the equity that you gained, making it a tax-deferred investment. Most tangible assets that have a long life operate in the same way since the Internal Revenue Service only recognizes a taxable gain when you sell the appreciated property.
  
  

Defer by Paying Late

• Paying your taxes late is a very short-term solution but can be better than the alternative. For instance, if you owe taxes on April 15 with your personal return and are a bit short, you could pay for them with a credit card, which would cost you a service fee, plus you would end up paying credit card interest. Depending on your card's interest rate, it may actually be cheaper to work out an installment agreement with the IRS and pay the interest and penalties while you pay down your balance. To defer your taxes in this way, you'll need to file your return on time.