Definition: In general investment language, a tax shelter is an arrangement or investment whose lawful deductions, exclusions, or deferrals reduce or postpone tax liability.
Example
Allowable depreciation on rental property can reduce taxable rental income even though it is not a current cash payment.
Keep the distinction clear
The term also has technical tax-law meanings and can describe abusive schemes. A real estate investment does not make all income tax-free; deduction limits and later tax consequences still apply.
Related terms
Depreciation · Adjusted Basis · Capital Gain
Keep studying
Tax Depreciation: Land, Building Basis, and Recovery Periods
References: IRS Publication 946: depreciation · IRS Publication 544: sales and dispositions of assets
Pronunciation (US): taks SHEL-ter (capitals show stress)
Pronunciation reference: Merriam-Webster
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