Final answer:
You can reduce your taxable income through deductions such as state taxes paid, and pre-tax retirement contributions. Furthermore, companies may adopt tax-efficient technologies and business strategies to legally decrease their taxable profits.
Step-by-step explanation:
Legal ways to reduce taxable income primarily involve taking advantage of deductions, credits, and adjustments allowed by the tax code. For example, individuals can deduct state and local taxes paid from their federal taxable income. Saving and investing for retirement is another legal method to reduce taxable income, as contributions to qualified retirement accounts like 401(k)s and IRAs can be made pre-tax, thereby lowering current taxable income.
Furthermore, businesses have opportunities to reduce their taxable income through various strategies. This may include adopting new technologies or business methods that qualify for tax credits or deductions. The corporate income tax on profits can be lowered by deducting legitimate business expenses, and by making strategic decisions that align with tax benefit provisions.