Tax avoidance refers to the legal strategies individuals and businesses use to minimize their tax liabilities. This can involve taking advantage of deductions, credits, and loopholes in tax laws to reduce the amount of income that is subject to taxation. Unlike tax evasion, which is illegal, tax avoidance operates within the framework of the law. Common methods of tax avoidance include investing in tax-deferred accounts, such as 401(k) plans or IRAs, and utilizing tax credits for specific activities, like education or energy efficiency improvements. While tax avoidance is legal, it can sometimes lead to ethical debates about fairness in the tax system.