diff --git a/README.md b/README.md
index a232aea..5730f53 100644
--- a/README.md
+++ b/README.md
@@ -11,6 +11,8 @@ A powerful, secure RESTful API for managing tasks and todos, built with FastAPI
 - 📝 Todo CRUD operations
   - Priority levels (High, Medium, Low)
   - Due dates for better task management
+  - Categories for task organization
+  - Tags for flexible grouping and filtering
   - Smart ordering by priority and due date
 - 👤 User management
 - 🔍 Advanced todo filtering and pagination
@@ -93,6 +95,22 @@ The application can be configured using the following environment variables:
 - `PUT /api/v1/todos/{id}` - Update a todo
 - `DELETE /api/v1/todos/{id}` - Delete a todo
 
+### Categories
+
+- `GET /api/v1/categories/` - List all categories
+- `POST /api/v1/categories/` - Create a new category
+- `GET /api/v1/categories/{id}` - Get category by ID
+- `PUT /api/v1/categories/{id}` - Update a category
+- `DELETE /api/v1/categories/{id}` - Delete a category
+
+### Tags
+
+- `GET /api/v1/tags/` - List all tags
+- `POST /api/v1/tags/` - Create a new tag
+- `GET /api/v1/tags/{id}` - Get tag by ID
+- `PUT /api/v1/tags/{id}` - Update a tag
+- `DELETE /api/v1/tags/{id}` - Delete a tag
+
 #### Todo Filtering
 
 The `GET /api/v1/todos/` endpoint supports the following query parameters:
@@ -104,6 +122,8 @@ The `GET /api/v1/todos/` endpoint supports the following query parameters:
 - `priority`: Filter by priority level (low, medium, high)
 - `due_date_before`: Filter for todos due before this date
 - `due_date_after`: Filter for todos due after this date
+- `category_id`: Filter by category ID
+- `tag_id`: Filter by tag ID
 
 ## Database Schema
 
@@ -126,9 +146,34 @@ description: Text (Optional)
 is_completed: Boolean (Default: False)
 priority: Enum(low, medium, high) (Default: medium)
 due_date: DateTime (Optional)
+category_id: Integer (Foreign Key to Category, Optional)
 owner_id: Integer (Foreign Key to User)
 ```
 
+### Category Model
+
+```
+id: Integer (Primary Key)
+name: String (Unique, Indexed)
+description: String (Optional)
+owner_id: Integer (Foreign Key to User)
+```
+
+### Tag Model
+
+```
+id: Integer (Primary Key)
+name: String (Unique, Indexed)
+owner_id: Integer (Foreign Key to User)
+```
+
+### TodoTag Association Table
+
+```
+todo_id: Integer (Foreign Key to Todo, Primary Key)
+tag_id: Integer (Foreign Key to Tag, Primary Key)
+```
+
 ### RefreshToken Model
 
 ```
diff --git a/app/api/v1/api.py b/app/api/v1/api.py
index d8ab29c..a12327c 100644
--- a/app/api/v1/api.py
+++ b/app/api/v1/api.py
@@ -1,9 +1,11 @@
 from fastapi import APIRouter
 
-from app.api.v1.endpoints import admin, auth, todos, users
+from app.api.v1.endpoints import admin, auth, categories, tags, todos, users
 
 api_router = APIRouter()
 api_router.include_router(auth.router, prefix="/auth", tags=["auth"])
 api_router.include_router(users.router, prefix="/users", tags=["users"])
 api_router.include_router(todos.router, prefix="/todos", tags=["todos"])
+api_router.include_router(categories.router, prefix="/categories", tags=["categories"])
+api_router.include_router(tags.router, prefix="/tags", tags=["tags"])
 api_router.include_router(admin.router, prefix="/admin", tags=["admin"])
\ No newline at end of file
diff --git a/app/api/v1/endpoints/categories.py b/app/api/v1/endpoints/categories.py
new file mode 100644
index 0000000..fbc0767
--- /dev/null
+++ b/app/api/v1/endpoints/categories.py
@@ -0,0 +1,111 @@
+from typing import Any, List
+
+from fastapi import APIRouter, Depends, HTTPException, status
+from sqlalchemy.orm import Session
+
+from app.api.deps import get_current_active_user, get_db
+from app.crud.crud_category import (
+    create_category,
+    delete_category,
+    get_categories,
+    get_category,
+    get_category_by_name,
+    update_category,
+)
+from app.models.user import User
+from app.schemas.category import Category, CategoryCreate, CategoryUpdate
+
+router = APIRouter()
+
+
+@router.get("/", response_model=List[Category])
+def read_categories(
+    db: Session = Depends(get_db),
+    skip: int = 0,
+    limit: int = 100,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Retrieve categories.
+    """
+    categories = get_categories(db=db, owner_id=current_user.id, skip=skip, limit=limit)
+    return categories
+
+
+@router.post("/", response_model=Category)
+def create_category_item(
+    *,
+    db: Session = Depends(get_db),
+    category_in: CategoryCreate,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Create new category.
+    """
+    category = get_category_by_name(
+        db=db, name=category_in.name, owner_id=current_user.id
+    )
+    if category:
+        raise HTTPException(
+            status_code=400,
+            detail="The category with this name already exists",
+        )
+    category = create_category(db=db, category_in=category_in, owner_id=current_user.id)
+    return category
+
+
+@router.get("/{id}", response_model=Category)
+def read_category(
+    *,
+    db: Session = Depends(get_db),
+    id: int,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Get category by ID.
+    """
+    category = get_category(db=db, category_id=id)
+    if not category:
+        raise HTTPException(status_code=404, detail="Category not found")
+    if category.owner_id != current_user.id:
+        raise HTTPException(status_code=400, detail="Not enough permissions")
+    return category
+
+
+@router.put("/{id}", response_model=Category)
+def update_category_item(
+    *,
+    db: Session = Depends(get_db),
+    id: int,
+    category_in: CategoryUpdate,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Update a category.
+    """
+    category = get_category(db=db, category_id=id)
+    if not category:
+        raise HTTPException(status_code=404, detail="Category not found")
+    if category.owner_id != current_user.id:
+        raise HTTPException(status_code=400, detail="Not enough permissions")
+    category = update_category(db=db, db_obj=category, obj_in=category_in)
+    return category
+
+
+@router.delete("/{id}", response_model=None, status_code=status.HTTP_204_NO_CONTENT)
+def delete_category_item(
+    *,
+    db: Session = Depends(get_db),
+    id: int,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Delete a category.
+    """
+    category = get_category(db=db, category_id=id)
+    if not category:
+        raise HTTPException(status_code=404, detail="Category not found")
+    if category.owner_id != current_user.id:
+        raise HTTPException(status_code=400, detail="Not enough permissions")
+    delete_category(db=db, category_id=id)
+    return None
\ No newline at end of file
diff --git a/app/api/v1/endpoints/tags.py b/app/api/v1/endpoints/tags.py
new file mode 100644
index 0000000..5120640
--- /dev/null
+++ b/app/api/v1/endpoints/tags.py
@@ -0,0 +1,109 @@
+from typing import Any, List
+
+from fastapi import APIRouter, Depends, HTTPException, status
+from sqlalchemy.orm import Session
+
+from app.api.deps import get_current_active_user, get_db
+from app.crud.crud_tag import (
+    create_tag,
+    delete_tag,
+    get_tag,
+    get_tag_by_name,
+    get_tags,
+    update_tag,
+)
+from app.models.user import User
+from app.schemas.tag import Tag, TagCreate, TagUpdate
+
+router = APIRouter()
+
+
+@router.get("/", response_model=List[Tag])
+def read_tags(
+    db: Session = Depends(get_db),
+    skip: int = 0,
+    limit: int = 100,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Retrieve tags.
+    """
+    tags = get_tags(db=db, owner_id=current_user.id, skip=skip, limit=limit)
+    return tags
+
+
+@router.post("/", response_model=Tag)
+def create_tag_item(
+    *,
+    db: Session = Depends(get_db),
+    tag_in: TagCreate,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Create new tag.
+    """
+    tag = get_tag_by_name(db=db, name=tag_in.name, owner_id=current_user.id)
+    if tag:
+        raise HTTPException(
+            status_code=400,
+            detail="The tag with this name already exists",
+        )
+    tag = create_tag(db=db, tag_in=tag_in, owner_id=current_user.id)
+    return tag
+
+
+@router.get("/{id}", response_model=Tag)
+def read_tag(
+    *,
+    db: Session = Depends(get_db),
+    id: int,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Get tag by ID.
+    """
+    tag = get_tag(db=db, tag_id=id)
+    if not tag:
+        raise HTTPException(status_code=404, detail="Tag not found")
+    if tag.owner_id != current_user.id:
+        raise HTTPException(status_code=400, detail="Not enough permissions")
+    return tag
+
+
+@router.put("/{id}", response_model=Tag)
+def update_tag_item(
+    *,
+    db: Session = Depends(get_db),
+    id: int,
+    tag_in: TagUpdate,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Update a tag.
+    """
+    tag = get_tag(db=db, tag_id=id)
+    if not tag:
+        raise HTTPException(status_code=404, detail="Tag not found")
+    if tag.owner_id != current_user.id:
+        raise HTTPException(status_code=400, detail="Not enough permissions")
+    tag = update_tag(db=db, db_obj=tag, obj_in=tag_in)
+    return tag
+
+
+@router.delete("/{id}", response_model=None, status_code=status.HTTP_204_NO_CONTENT)
+def delete_tag_item(
+    *,
+    db: Session = Depends(get_db),
+    id: int,
+    current_user: User = Depends(get_current_active_user),
+) -> Any:
+    """
+    Delete a tag.
+    """
+    tag = get_tag(db=db, tag_id=id)
+    if not tag:
+        raise HTTPException(status_code=404, detail="Tag not found")
+    if tag.owner_id != current_user.id:
+        raise HTTPException(status_code=400, detail="Not enough permissions")
+    delete_tag(db=db, tag_id=id)
+    return None
\ No newline at end of file
diff --git a/app/api/v1/endpoints/todos.py b/app/api/v1/endpoints/todos.py
index 59f8d68..09fd0d6 100644
--- a/app/api/v1/endpoints/todos.py
+++ b/app/api/v1/endpoints/todos.py
@@ -29,6 +29,8 @@ def read_todos(
     priority: Optional[PriorityLevel] = None,
     due_date_before: Optional[datetime] = None,
     due_date_after: Optional[datetime] = None,
+    category_id: Optional[int] = None,
+    tag_id: Optional[int] = None,
     current_user: User = Depends(get_current_active_user),
 ) -> Any:
     """
@@ -41,6 +43,8 @@ def read_todos(
     - **priority**: Filter by priority level (low, medium, high)
     - **due_date_before**: Filter for todos due before this date
     - **due_date_after**: Filter for todos due after this date
+    - **category_id**: Filter by category ID
+    - **tag_id**: Filter by tag ID
     """
     todos = get_todos(
         db=db, 
@@ -51,7 +55,9 @@ def read_todos(
         is_completed=is_completed,
         priority=priority,
         due_date_before=due_date_before,
-        due_date_after=due_date_after
+        due_date_after=due_date_after,
+        category_id=category_id,
+        tag_id=tag_id
     )
     return todos
 
diff --git a/app/crud/crud_category.py b/app/crud/crud_category.py
new file mode 100644
index 0000000..e01a158
--- /dev/null
+++ b/app/crud/crud_category.py
@@ -0,0 +1,51 @@
+from typing import List, Optional
+
+from sqlalchemy.orm import Session
+
+from app.models.category import Category
+from app.schemas.category import CategoryCreate, CategoryUpdate
+
+
+def get_category(db: Session, category_id: int) -> Optional[Category]:
+    return db.query(Category).filter(Category.id == category_id).first()
+
+
+def get_category_by_name(db: Session, name: str, owner_id: int) -> Optional[Category]:
+    return db.query(Category).filter(Category.name == name, Category.owner_id == owner_id).first()
+
+
+def get_categories(
+    db: Session, owner_id: int, skip: int = 0, limit: int = 100
+) -> List[Category]:
+    return db.query(Category).filter(Category.owner_id == owner_id).offset(skip).limit(limit).all()
+
+
+def create_category(db: Session, category_in: CategoryCreate, owner_id: int) -> Category:
+    db_category = Category(
+        name=category_in.name,
+        description=category_in.description,
+        owner_id=owner_id
+    )
+    db.add(db_category)
+    db.commit()
+    db.refresh(db_category)
+    return db_category
+
+
+def update_category(
+    db: Session, db_obj: Category, obj_in: CategoryUpdate
+) -> Category:
+    update_data = obj_in.model_dump(exclude_unset=True)
+    for field in update_data:
+        setattr(db_obj, field, update_data[field])
+    db.add(db_obj)
+    db.commit()
+    db.refresh(db_obj)
+    return db_obj
+
+
+def delete_category(db: Session, category_id: int) -> Category:
+    category = db.query(Category).filter(Category.id == category_id).first()
+    db.delete(category)
+    db.commit()
+    return category
\ No newline at end of file
diff --git a/app/crud/crud_tag.py b/app/crud/crud_tag.py
new file mode 100644
index 0000000..d37d55c
--- /dev/null
+++ b/app/crud/crud_tag.py
@@ -0,0 +1,54 @@
+from typing import List, Optional
+
+from sqlalchemy.orm import Session
+
+from app.models.tag import Tag
+from app.schemas.tag import TagCreate, TagUpdate
+
+
+def get_tag(db: Session, tag_id: int) -> Optional[Tag]:
+    return db.query(Tag).filter(Tag.id == tag_id).first()
+
+
+def get_tag_by_name(db: Session, name: str, owner_id: int) -> Optional[Tag]:
+    return db.query(Tag).filter(Tag.name == name, Tag.owner_id == owner_id).first()
+
+
+def get_tags(
+    db: Session, owner_id: int, skip: int = 0, limit: int = 100
+) -> List[Tag]:
+    return db.query(Tag).filter(Tag.owner_id == owner_id).offset(skip).limit(limit).all()
+
+
+def get_tags_by_ids(db: Session, tag_ids: List[int], owner_id: int) -> List[Tag]:
+    return db.query(Tag).filter(Tag.id.in_(tag_ids), Tag.owner_id == owner_id).all()
+
+
+def create_tag(db: Session, tag_in: TagCreate, owner_id: int) -> Tag:
+    db_tag = Tag(
+        name=tag_in.name,
+        owner_id=owner_id
+    )
+    db.add(db_tag)
+    db.commit()
+    db.refresh(db_tag)
+    return db_tag
+
+
+def update_tag(
+    db: Session, db_obj: Tag, obj_in: TagUpdate
+) -> Tag:
+    update_data = obj_in.model_dump(exclude_unset=True)
+    for field in update_data:
+        setattr(db_obj, field, update_data[field])
+    db.add(db_obj)
+    db.commit()
+    db.refresh(db_obj)
+    return db_obj
+
+
+def delete_tag(db: Session, tag_id: int) -> Tag:
+    tag = db.query(Tag).filter(Tag.id == tag_id).first()
+    db.delete(tag)
+    db.commit()
+    return tag
\ No newline at end of file
diff --git a/app/crud/crud_todo.py b/app/crud/crud_todo.py
index 9c7887e..6a32792 100644
--- a/app/crud/crud_todo.py
+++ b/app/crud/crud_todo.py
@@ -3,6 +3,7 @@ from typing import List, Optional
 
 from sqlalchemy.orm import Session
 
+from app.crud.crud_tag import get_tags_by_ids
 from app.models.todo import PriorityLevel, Todo
 from app.schemas.todo import TodoCreate, TodoUpdate
 
@@ -20,7 +21,9 @@ def get_todos(
     is_completed: Optional[bool] = None,
     priority: Optional[PriorityLevel] = None,
     due_date_before: Optional[datetime] = None,
-    due_date_after: Optional[datetime] = None
+    due_date_after: Optional[datetime] = None,
+    category_id: Optional[int] = None,
+    tag_id: Optional[int] = None
 ) -> List[Todo]:
     query = db.query(Todo).filter(Todo.owner_id == owner_id)
     
@@ -39,6 +42,12 @@ def get_todos(
     if due_date_after is not None:
         query = query.filter(Todo.due_date >= due_date_after)
     
+    if category_id is not None:
+        query = query.filter(Todo.category_id == category_id)
+    
+    if tag_id is not None:
+        query = query.join(Todo.tags).filter(Todo.tags.any(id=tag_id))
+    
     # Order by priority (highest first) and due date (earliest first)
     query = query.order_by(Todo.priority.desc(), Todo.due_date.asc())
         
@@ -52,11 +61,21 @@ def create_todo(db: Session, todo_in: TodoCreate, owner_id: int) -> Todo:
         is_completed=todo_in.is_completed,
         priority=todo_in.priority,
         due_date=todo_in.due_date,
+        category_id=todo_in.category_id,
         owner_id=owner_id
     )
     db.add(db_todo)
     db.commit()
     db.refresh(db_todo)
+    
+    # Add tags if provided
+    if todo_in.tags:
+        tags = get_tags_by_ids(db, todo_in.tags, owner_id)
+        db_todo.tags = tags
+        db.add(db_todo)
+        db.commit()
+        db.refresh(db_todo)
+    
     return db_todo
 
 
@@ -64,11 +83,26 @@ def update_todo(
     db: Session, db_obj: Todo, obj_in: TodoUpdate
 ) -> Todo:
     update_data = obj_in.model_dump(exclude_unset=True)
+    
+    # Handle tags separately
+    tags_data = update_data.pop("tags", None)
+    
+    # Update other fields
     for field in update_data:
         setattr(db_obj, field, update_data[field])
+    
     db.add(db_obj)
     db.commit()
     db.refresh(db_obj)
+    
+    # Update tags if provided
+    if tags_data is not None:
+        tags = get_tags_by_ids(db, tags_data, db_obj.owner_id)
+        db_obj.tags = tags
+        db.add(db_obj)
+        db.commit()
+        db.refresh(db_obj)
+    
     return db_obj
 
 
diff --git a/app/models/category.py b/app/models/category.py
new file mode 100644
index 0000000..5b46938
--- /dev/null
+++ b/app/models/category.py
@@ -0,0 +1,16 @@
+from sqlalchemy import Column, ForeignKey, Integer, String
+from sqlalchemy.orm import relationship
+
+from app.db.base import Base
+
+
+class Category(Base):
+    __tablename__ = "categories"
+
+    id = Column(Integer, primary_key=True, index=True)
+    name = Column(String, index=True, unique=True)
+    description = Column(String, nullable=True)
+    owner_id = Column(Integer, ForeignKey("users.id"))
+
+    owner = relationship("User", back_populates="categories")
+    todos = relationship("Todo", back_populates="category")
\ No newline at end of file
diff --git a/app/models/tag.py b/app/models/tag.py
new file mode 100644
index 0000000..400cb1e
--- /dev/null
+++ b/app/models/tag.py
@@ -0,0 +1,24 @@
+from sqlalchemy import Column, ForeignKey, Integer, String, Table
+from sqlalchemy.orm import relationship
+
+from app.db.base import Base
+
+
+# Association table for many-to-many relationship between Todo and Tag
+todo_tag = Table(
+    "todo_tag",
+    Base.metadata,
+    Column("todo_id", Integer, ForeignKey("todos.id"), primary_key=True),
+    Column("tag_id", Integer, ForeignKey("tags.id"), primary_key=True),
+)
+
+
+class Tag(Base):
+    __tablename__ = "tags"
+
+    id = Column(Integer, primary_key=True, index=True)
+    name = Column(String, index=True, unique=True)
+    owner_id = Column(Integer, ForeignKey("users.id"))
+
+    owner = relationship("User", back_populates="tags")
+    todos = relationship("Todo", secondary=todo_tag, back_populates="tags")
\ No newline at end of file
diff --git a/app/models/todo.py b/app/models/todo.py
index e106ae7..decd692 100644
--- a/app/models/todo.py
+++ b/app/models/todo.py
@@ -3,6 +3,7 @@ from sqlalchemy import Boolean, Column, DateTime, Enum, ForeignKey, Integer, Str
 from sqlalchemy.orm import relationship
 
 from app.db.base import Base
+from app.models.tag import todo_tag
 
 
 class PriorityLevel(str, PyEnum):
@@ -21,5 +22,8 @@ class Todo(Base):
     priority = Column(Enum(PriorityLevel), default=PriorityLevel.MEDIUM)
     due_date = Column(DateTime, nullable=True)
     owner_id = Column(Integer, ForeignKey("users.id"))
+    category_id = Column(Integer, ForeignKey("categories.id"), nullable=True)
 
-    owner = relationship("User", back_populates="todos")
\ No newline at end of file
+    owner = relationship("User", back_populates="todos")
+    category = relationship("Category", back_populates="todos")
+    tags = relationship("Tag", secondary=todo_tag, back_populates="todos")
\ No newline at end of file
diff --git a/app/models/user.py b/app/models/user.py
index 5b7f67a..7f82d89 100644
--- a/app/models/user.py
+++ b/app/models/user.py
@@ -19,4 +19,6 @@ class User(Base):
     is_active = Column(Boolean, default=True)
     role = Column(Enum(UserRole), default=UserRole.USER)
 
-    todos = relationship("Todo", back_populates="owner")
\ No newline at end of file
+    todos = relationship("Todo", back_populates="owner")
+    categories = relationship("Category", back_populates="owner")
+    tags = relationship("Tag", back_populates="owner")
\ No newline at end of file
diff --git a/app/schemas/category.py b/app/schemas/category.py
new file mode 100644
index 0000000..c7a68cb
--- /dev/null
+++ b/app/schemas/category.py
@@ -0,0 +1,39 @@
+from typing import Optional
+
+from pydantic import BaseModel
+
+
+# Shared properties
+class CategoryBase(BaseModel):
+    name: Optional[str] = None
+    description: Optional[str] = None
+
+
+# Properties to receive on category creation
+class CategoryCreate(CategoryBase):
+    name: str
+
+
+# Properties to receive on category update
+class CategoryUpdate(CategoryBase):
+    pass
+
+
+# Properties shared by models stored in DB
+class CategoryInDBBase(CategoryBase):
+    id: int
+    name: str
+    owner_id: int
+
+    class Config:
+        from_attributes = True
+
+
+# Properties to return to client
+class Category(CategoryInDBBase):
+    pass
+
+
+# Properties properties stored in DB
+class CategoryInDB(CategoryInDBBase):
+    pass
\ No newline at end of file
diff --git a/app/schemas/tag.py b/app/schemas/tag.py
new file mode 100644
index 0000000..8389115
--- /dev/null
+++ b/app/schemas/tag.py
@@ -0,0 +1,38 @@
+from typing import Optional
+
+from pydantic import BaseModel
+
+
+# Shared properties
+class TagBase(BaseModel):
+    name: Optional[str] = None
+
+
+# Properties to receive on tag creation
+class TagCreate(TagBase):
+    name: str
+
+
+# Properties to receive on tag update
+class TagUpdate(TagBase):
+    pass
+
+
+# Properties shared by models stored in DB
+class TagInDBBase(TagBase):
+    id: int
+    name: str
+    owner_id: int
+
+    class Config:
+        from_attributes = True
+
+
+# Properties to return to client
+class Tag(TagInDBBase):
+    pass
+
+
+# Properties properties stored in DB
+class TagInDB(TagInDBBase):
+    pass
\ No newline at end of file
diff --git a/app/schemas/todo.py b/app/schemas/todo.py
index b82f8f9..a6dc226 100644
--- a/app/schemas/todo.py
+++ b/app/schemas/todo.py
@@ -1,9 +1,11 @@
 from datetime import datetime
-from typing import Optional
+from typing import List, Optional
 
 from pydantic import BaseModel
 
 from app.models.todo import PriorityLevel
+from app.schemas.category import Category
+from app.schemas.tag import Tag
 
 
 # Shared properties
@@ -13,16 +15,18 @@ class TodoBase(BaseModel):
     is_completed: Optional[bool] = False
     priority: Optional[PriorityLevel] = PriorityLevel.MEDIUM
     due_date: Optional[datetime] = None
+    category_id: Optional[int] = None
 
 
 # Properties to receive on item creation
 class TodoCreate(TodoBase):
     title: str
+    tags: Optional[List[int]] = None  # List of tag IDs
 
 
 # Properties to receive on item update
 class TodoUpdate(TodoBase):
-    pass
+    tags: Optional[List[int]] = None  # List of tag IDs
 
 
 # Properties shared by models stored in DB
@@ -37,7 +41,8 @@ class TodoInDBBase(TodoBase):
 
 # Properties to return to client
 class Todo(TodoInDBBase):
-    pass
+    category: Optional[Category] = None
+    tags: List[Tag] = []
 
 
 # Properties properties stored in DB
diff --git a/migrations/versions/005_add_categories_and_tags.py b/migrations/versions/005_add_categories_and_tags.py
new file mode 100644
index 0000000..a224835
--- /dev/null
+++ b/migrations/versions/005_add_categories_and_tags.py
@@ -0,0 +1,78 @@
+"""add categories and tags
+
+Revision ID: 005
+Revises: 004
+Create Date: 2023-11-18
+
+"""
+from alembic import op
+import sqlalchemy as sa
+
+
+# revision identifiers, used by Alembic.
+revision = '005'
+down_revision = '004'
+branch_labels = None
+depends_on = None
+
+
+def upgrade():
+    # Create categories table
+    op.create_table(
+        'categories',
+        sa.Column('id', sa.Integer(), nullable=False),
+        sa.Column('name', sa.String(), nullable=True),
+        sa.Column('description', sa.String(), nullable=True),
+        sa.Column('owner_id', sa.Integer(), nullable=True),
+        sa.ForeignKeyConstraint(['owner_id'], ['users.id'], ),
+        sa.PrimaryKeyConstraint('id')
+    )
+    op.create_index(op.f('ix_categories_id'), 'categories', ['id'], unique=False)
+    op.create_index(op.f('ix_categories_name'), 'categories', ['name'], unique=True)
+
+    # Create tags table
+    op.create_table(
+        'tags',
+        sa.Column('id', sa.Integer(), nullable=False),
+        sa.Column('name', sa.String(), nullable=True),
+        sa.Column('owner_id', sa.Integer(), nullable=True),
+        sa.ForeignKeyConstraint(['owner_id'], ['users.id'], ),
+        sa.PrimaryKeyConstraint('id')
+    )
+    op.create_index(op.f('ix_tags_id'), 'tags', ['id'], unique=False)
+    op.create_index(op.f('ix_tags_name'), 'tags', ['name'], unique=True)
+
+    # Create todo_tag association table
+    op.create_table(
+        'todo_tag',
+        sa.Column('todo_id', sa.Integer(), nullable=False),
+        sa.Column('tag_id', sa.Integer(), nullable=False),
+        sa.ForeignKeyConstraint(['tag_id'], ['tags.id'], ),
+        sa.ForeignKeyConstraint(['todo_id'], ['todos.id'], ),
+        sa.PrimaryKeyConstraint('todo_id', 'tag_id')
+    )
+
+    # Add category_id to todos table
+    with op.batch_alter_table('todos', schema=None) as batch_op:
+        batch_op.add_column(sa.Column('category_id', sa.Integer(), nullable=True))
+        batch_op.create_foreign_key('fk_todos_category_id', 'categories', ['category_id'], ['id'])
+
+
+def downgrade():
+    # Remove category_id from todos table
+    with op.batch_alter_table('todos', schema=None) as batch_op:
+        batch_op.drop_constraint('fk_todos_category_id', type_='foreignkey')
+        batch_op.drop_column('category_id')
+
+    # Drop todo_tag association table
+    op.drop_table('todo_tag')
+
+    # Drop tags table
+    op.drop_index(op.f('ix_tags_name'), table_name='tags')
+    op.drop_index(op.f('ix_tags_id'), table_name='tags')
+    op.drop_table('tags')
+
+    # Drop categories table
+    op.drop_index(op.f('ix_categories_name'), table_name='categories')
+    op.drop_index(op.f('ix_categories_id'), table_name='categories')
+    op.drop_table('categories')
\ No newline at end of file