There are a myriad of types of federal and state taxes out there as governments try to come up with as many ways as possible to obtain funding. The following is an overview of taxes beginning with everyone's favorite, personal income tax. The goal with any income tax is always the same. Minimizing taxable income minimizes taxes paid.

The calculation is composed of income, deductions, and exemptions. All sources of household income are listed (wages, interest, dividends etc.). Items like contributions to an Individual Retirement Account, student loan interest expense, and alimony reduce this amount. Adjusted Gross Income, or AGI, is the result.

"Itemizing", listing personal and medical expenses to determine whether they are greater than the "standard deduction" is one way to reduce taxable income.

Once exemptions (depending on how many dependents) are deducted, taxable income, and then, tax is calculated. Take advantage of any credits that may apply such as the credit for foreign taxes paid, education credit, and the adoption credit. The self employment tax and alternative minimum tax can increase the total liability.

Once the tax is determined, employer withholding and estimated payments are deducted. One can avoid any estimated payment penalty by adjusting withholding at any time during the year. Complete a new withholding form and submit it to your employer.

Accelerating capital gains (if expecting a future tax increase) or losses (if the future is now!), investment in tax free or state tax exempt items (recommended by a financial advisor) or donations of property in addition to cash can reduce taxes.

State personal income tax follows a very similar procedure as the federal but with adjustments for state tax law. What's deductible on a federal level, may not help reduce taxable income for state purposes. Specific types of interest, state income taxes, and exemption amounts, are a few items that may be treated differently by your state.

Corporate income tax begins with gross income from your business for the year. A regular C corporation reports income on page one of a Federal 1120 form. (Different forms are used for different types of business entities.) Income includes sales, interest, dividends, and gains and losses.

Business expenses such as wages and cost of goods sold are deducted. Items like depreciation, and gains and losses must be calculated according to statutory guidelines and

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