For some investors, avoiding taxes is a primary task.  Others, however, consider tax implications only after a transaction is executed or a financial strategy implemented.  There are those who view tax planning as a "Gordian knot" of complexity so great that only the very sophisticated can solve the riddle.  Others, meanwhile, have concluded that various changes in legislation through the years have only made updating tax strategies a never-ending financial frustration.

Regardless of an investor's view, tax implications should be considered with every financial decision.  With current tax laws, savings opportunities abound for investors.  Yet, costly traps also exist for the unwary.

Former U.S. Appeals Court Justice Learned Hand once said, "Anyone may so arrange his affairs that his taxes shall be as low as possible.  He is not bound to choose that pattern which best pays the Treasury.  Everyone does it, rich and poor alike, and all do right; for nobody owes any public duty to pay more than the law demands."

Just as financial planning decisions have tax implications, income tax decisions have financial planning implications.  When crafting a comprehensive financial strategy, it is critical for an individual to select tax saving strategies most consistent with achieving his or her overall goals.

Intelligent tax planning is based on seven fundamental principles.  When understood, they may help guide individuals to tax-smart decisions.

Taxes act like rust on investment returns.

The first fundamental principle of effective tax planning is to understand how taxes affect investment returns.  Analyzing the tax impact of an investment strategy requires the use of marginal tax rates.  Under current laws, there are six marginal tax rates: 10%, 15%, 25%, 28%, 33% and 35%.  These marginal rates apply at different levels of taxable income depending on an individual's filing status