Tax Shelter

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