Tax optimization is the process of arranging your financial affairs in a way that minimizes your tax liability while remaining compliant with the law. This can involve strategies like taking advantage of tax deductions, credits, and exemptions. By understanding the tax code and utilizing available resources, individuals and businesses can keep more of their earnings and invest them wisely. One common method of tax optimization is contributing to retirement accounts, such as a 401(k) or IRA. These accounts often provide tax benefits, allowing you to save for the future while reducing your taxable income today. Proper planning and advice from a tax professional can significantly enhance your tax efficiency.