Definition of tax shelter
: a strategy, investment, or tax code provision that reduces tax liability
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Recent Examples of tax shelter from the Web
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Unless, of course, the Rauners and Pritzkers hide their money in offshore tax shelters.
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The star owed $32 million to the IRS after hiding money and tax shelters, Rolling Stonereports.
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But the regime’s rationale, essentially instituting far lower rates while eliminating sweeping tax shelters, affects different companies in extremely different ways.
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The European Union has been exploring ways to make U.S. technology companies, many of which use similar tax shelters, pay more.
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The tax rules encouraged investors to do all sorts of things with their money that did nothing to build the economy, but rather only made sense as tax shelters.
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That is a powerful incentive to search for tax shelters.
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Interest deductions are capped at 30% of earnings, but not eliminated; and the plan includes a minimum tax on profits earned in overseas tax shelter countries, but not as onerous as feared.
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People who are buying homes for primary residence buy to own a home,and not for a tax shelter.
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'tax shelter.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
First Known Use of tax shelter
1952
Financial Definition of TAX SHELTER
tax shelter
What It Is
A tax shelter is a means of minimizing one's tax liability. Tax shelters can be both legal and illegal.
How It Works
The most widely used tax shelter in the United States is the 401(k) employer sponsored plan. It is generally available to an employee to both reduce the amount of taxes paid on his income as well as to save for his future retirement.
The Internal Revenue Service (IRS) investment vehicles such as 401(k)s and IRAs as legal tax avoidance mechanisms.
Limited partnerships are also considered legal tax shelters. They can avoid taxes because the business -- for example mining companies --require several years and heavy capital investment before a real income is realized. Taxes are levied as soon as the company starts to make income.
[InvestingAnswers Feature: The Most Important Tax Changes to Know Before Filing Your Tax Return]
Why It Matters
While retirement plans and limited partnerships are legal, many investment vehicles are illegal. A series of tax laws have been implemented to put a stop to abusive tax shelters.
The IRS will attach a fee if one places money into an "abusive" shelter. Abusive shelters are those that "exist primarily to reduce taxes unreasonably for tax avoidance or evasion... A legitimate investment produces income or capital appreciation and involves a risk of loss proportionate to the investment."
Illegal tax shelters include offshore companies which beguile the tax system.
More information on tax shelters may be found at the IRS website.
Source: Investing Answers
TAX SHELTER Defined for English Language Learners
tax shelter
Definition of tax shelter for English Language Learners
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: a way of investing money that reduces the amount of tax that has to be paid
Law Dictionary
tax shelter
legal Definition of tax shelter
: 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
Learn More about tax shelter
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Britannica.com: Encyclopedia article about tax shelter
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