Tax Avoidance

What it is:

Tax avoidance is the legal act of minimizing one's taxes. It is not the same as tax evasion.

How it works/Example:

Practically every taxpayer engages in tax avoidance at some point in order to minimize his or her tax bill. For example, taxpayers who contribute to Individual Retirement Accounts (IRAs) before the April 15 tax deadline are engaging in tax avoidance because those contributions are deductible and thus lower their tax bills. Similarly, charitable contributions are tax-deductible and thus another way that taxpayers can lower their tax bills.

Why it Matters:

Tax avoidance is legal. Tax evasion is not.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.