tax shelter

tax shelter   n.  A financial arrangement, such as the use of special depletion allowances, that reduces taxes on current earnings. tax'-shel'tered (tāks'shěl'tərd) adj.

tax shelter

A type of investment that allows a reduction in one's taxable income. Examples include investments in pension plans and real estate.

Tax Shelter

An investment selected mainly because it provides favorable tax treatment.

Investopedia Commentary

The IRS watches tax shelters carefully. If an investment is made for the sole purpose of avoiding or evading taxes, you could be forced to pay tax (or even penalties).

Related Links

Common Tax Questions Answered
Tax Tips For The Individual Investor
Five Tips for the Tax-Smart Investor

See also: Income Shifting, Internal Revenue Service - IRS, Tax Evasion, Tax Haven, Tax Shield

tax shelter

An investment that produces relatively large current deductions that can be used to offset other taxable income. Popular tax shelters include real estate projects and gas and oil drilling ventures. Also called shelter. See also abusive tax shelter.

Main Entry: tax shelter
Function: noun
: an entity (as a partnership) or investment plan or arrangement whose principal purpose is the avoidance or evasion of income tax; also : an interest offered or purchased on the premise that it will provide favorable tax consequences tax shelters>