Tax Planning
The tax code engages in social engineering. It encourages certain kinds of conduct and discourages others by the ways it awards and withholds tax benefits. If you have your own business, if you do many different things, if you are an active investor, etc., then you often wear many hats, which means there are opportunities and choices open to you that are not available to most persons.
It is amazing, and not very well known, just how much control a small businessman has over his income taxes, not only how that income is taxed, but also when it is taxed, and even sometimes how much of it is taxed. I am not suggesting tax shelters here. We are talking about setting up your business structures on purpose to get the desired tax results.
A full-time landlord, for example, if he sets things up one way, does not have to pay FICA or self employment taxes, plus that income can be sheltered by his other real estate investments. On the other hand, the same landlord might decide to structure his affairs so that he does pay those taxes in order to let him take advantage of other losses, maximize contributions to his pension plan, improve his credit rating scores, etc., etc.
The key to effective tax planning is to, in advance, structure your business dealings for good business reasons, in ways that fit best with what the tax code says it would prefer (where it offers the most benefits).
This is often easier than one might think. However, it does require that you have a wider range of understanding than most people about the different ways one might do business, and how they interact with the tax code. For instance, the income from certain kinds of leases is taxed like portfolio income (like dividends, etc.); other leases produce passive income (perhaps the most common). But still others produce ordinary income, with all of the advantages and disadvantages of that treatment. Understanding this and giving some thought on how to change the structure of your business might greatly affect how your income is taxed.