The most effective way to pay the least tax that you are legally obligated to pay is to make financial decisions with an eye to their tax consequences. For example, one way to reduce your current income tax is to contribute to a tax-deferred retirement account, such as an employer-sponsored plan. Your contribution reduces the income that's reported to the IRS and as a result, the current tax you owe. Any earnings in the account are also tax deferred.

Of course, when you take money out of the account after you retire, you'll owe tax on the full amount of your withdrawal. But you may be paying at a lower tax rate when you take money out that you were when you put it in. In some sense it's a gamble, but thanks to the power of compounding, it's possible to come out significantly ahead, even if tax rates have increased.

Or, if you want to avoid mandatory taxable withdrawals from your retirement savings, you might put your retirement money in a tax-free Roth IRA. While you'll contribute after-tax income, your withdrawals will be completely free of federal income tax provided your account has been open at least five years and you're at least 59½. Similar tax savings are available for college savings with Coverdell eduation savings account (ESA) or a 529 college savings plan.