Much of this thread is repost of parts of other threads and blogs from a year ago. I"ve been continually asked about this subject and there are lots of newbies on BP that may benefit from this.
I want - to start with this and then build on it. This post is strictly on taxes. The next and last one will be on Estate planning and keeping what you earn.
There are many ways to arrange your affairs to "legally" avoid income taxes. I wouldn't begin to to try and say I know all the tricks and methods, but I've tried to learn new ways throughout my career. I'M NOT AN ACCOUNTANT.

I've always spent about half the year earning money and the other half figuring out how to keep it. As I'm doing this, I realize I may be able to offer some suggestions that would help your tax situation. First- disclaimer- I'm NOT an acct., but I know a lot about the Tax Code and have beaten the IRS twice in audits and am VERY proud of it.

Here are some of the methods used.

If you have the ability to build a home and have a flexible wife, MOVE often if property is appreciating in your area. Many years ago, you could only sell your personal residence ONE time in your life, at age 55 or older and take the first 125K tax free(250K if married). This rule was changed and now ; there is no age requirement, you can do it over and over again every couple years,and make 500K EACH time tax free.I did this 4 times in UTAH, never left the neighborhood, and made about 600-700K TAX free in total . That is like after tax earnings of near a million dollars. With zero taxes owed.

Have your own business, or start a SECOND business. The reason is that you are allowed to deduct a lot of items for business purposes that you can't deduct as an individual only. YOU MUST do this!! Turn current EXPENSES into deductions. You don't have to SPEND more to save taxes. They just have to qualify as a deduction, rather than just an expense. Travel and equipment acquisition subject to Sec. 179, are big benefits in this category.

YOU MUST be in the real estate business. This is a VERY loosely defined business. Mgmt, handyman, escrow, contractors or sub contractors MAY qualify. You are limited to 25K deductions as passive losses if not "in the business." No limit if you are in the business. I take hundres of thousands in loss each year from depreciation and other write-offs, and I couldn't do this if I was not in the business.

YOU DON"T have to make any money. Take your hobby and make it a business. When it doesn't make any money, shut it down after 3 years and start another one for 3 years. The only IRS requirements are that the business needs to make money in 2 of the first 5 years. There have actually been a couple cases where the # of years with no earnings may be extended past 3 year losses. (orchards, raising horses, etc). Turn your motorhome or 4 wheelers into a rental business. Under certain conditions, you may gain additional deductions from expenses you already incur.

Write off ALL your trips. Look for real estate or a job where ever you go. Document it and set up appts. The worst case, you might be offered a better job in Hawaii. You then may deduct the majority of costs on the trip.

Buy properties where you like to visit. IRS allows you to write off expenses to check your properties twice a year. I own in Cancun and have written off 50 trips!! You may also wite off trips if you're going to a new area"to possibly buy properties". Look around, meet with a realtor, make low ball offers. Worst case is you may steal a property or two. You want to be in the real estate business for sure.

Have your kids do the laundry, wash the cars, mow the lawns(where you maintain a home office) etc. You may pay them "fair " market rate (find the highest custom wash place). They MUST do the work. Then, you tell them they get to buy their own clothes and food!! You just created tax deductions for expenses that previuosly weren't decuctible, clothes and food. If you allow your mind to wander, you'll be able to come up with additional ideas tailored to your particular situation.

Buy a computer, and depreciate it. Then give it to a kid. LEASE it back from them and you create a tax deduction!! Isn't this fun? Then the kid buys his own school lunches (or gets them free from the govt!), etc--tax deductible. You don't have to lease from Xerox or IBM, just keep accurate paperwork, write checks and document the transaction.

Buying real estate is a tremendous boon to wealth creation. To benefit from the write offs, you must be "in the business". Check the requirements for tax purposes. There is no limit to how much write-offs you can use to offset income, if in the business. Older properties do not afford the same options on depreciation. The basis is split between land/improvements. NORMALLY, as a property ages, the land value increases and the improvement value decreases. After years of ownership, the basis is no longer as beneficial as when property was acquired originally. This would be the time to consider other options with the property

1. Re-fi the property and use proceeds to purchase additional depreciable real estate. You create new additional basis and additional deductions. The re-fi funds you received are proceeds of a loan and NOT taxable in any way. This gives you a free pool of money to increase real estate holdings. You may do this over and over again for as long as you want and incur no tax consequences.

2. 1031 - After owning the properties for a long time, the basis is no longer advantageous for the amount of equity in the property. No reason to be nervous abouth a 1031 exchange. They are not difficult to accomplish when the time is right.

I'M NOT an acct. but I do know this stuff. I'm sure others have some good ideas also. I had an Acct that told me to always try to take the most deductions possible. If you can make an argument for your position, do it. Calling a tangerine an orange is a definite arguable point. Remember, it is stupid not to try and get every deuction possible. Orange/tangerine example. The majority of years, you'll never be audited and therefore, you automatically "win" on your tax return. The few times you may get audited, as long as your point is arguable, you may still win. If the audit leads to a different outcome, and your point is still arguable, appeal to an investigator or higher level auditor. Remember, in the example of orage/tangerine,both are round, orange with seeds and pulp. Calling a cucumber an orange, you may pay taxes, penalty fees and go to jail!!

I hope this post causes you to think. You have to beat the tax man to create real wealth, imo.Paying Income taxes is one of the top 4 obstacles to creating real wealth along with procrastination, spending habits and inflation.

Please feel free to add your ideas and suggestions to this post.

Good luck. Rich in FL.