tax shelter

noun

Definition of tax shelter

: a strategy, investment, or tax code provision that reduces tax liability

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We were originally involved in B movies (Billy Jack movies, etc.) as these were more or less tax shelters. — Jane Wooldridge, miamiherald, "This Miami man created the Florida prepaid college plan. He also owned Studio 54.," 2 July 2018 Around the same time, as a presidential candidate, Mr. Trump began attacking Amazon, writing on Twitter that Mr. Bezos was using the Washington Post as a tax shelter. — John D. Mckinnon, WSJ, "How Amazon Became One of Washington’s Most Powerful Players," 20 June 2018 Does this go over well with fans in the true home countries, who don't have the luxury of a tax shelter, or is the desire to see a compatriot champion enough for forgiveness? — Jon Wertheim, SI.com, "Mailbag: Serena Williams Should Absolutely Be Seeded at the French Open," 23 May 2018 In reality, lawmakers from both parties supported House Bill 4007, which also created tax sheltered savings accounts for first-time homebuyers, a priority for the real estate industry. — Hillary Borrud, OregonLive.com, "Grocers pour $2 million into effort to ban taxes on food," 15 May 2018 The year is 2002 and former lobbyist Soussan (an earnest Theo James) is searching for something more meaningful than tax shelters, sweatshops and ozone holes. — Michael Rechtshaffen, latimes.com, "U.N. intrigue and corruption in 'Backstabbing for Beginners'," 26 Apr. 2018 JPMorgan employs nearly 10,000 people in the Philadelphia area, mostly at its credit card, consumer lending, information technology, tax shelter and other offices in northern Delaware. — Joseph N. Distefano, Philly.com, "JPMorgan Chase plans new branches in Philly and beyond," 11 Apr. 2018 Unless, of course, the Rauners and Pritzkers hide their money in offshore tax shelters. — Ben Joravsky, Chicago Reader, "Politics Let’s make Pritzker and Rauner pay more—a lot more—in state income taxes," 20 Mar. 2018 The star owed $32 million to the IRS after hiding money and tax shelters, Rolling Stonereports. — Ashley May, USA TODAY, "Lisa Marie Presley joins list of celebrities who’ve lost nearly everything," 27 Feb. 2018

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.

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The first known use of tax shelter was in 1952

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tax shelter

noun

Financial Definition of 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.

[InvestingAnswers Feature: How to Avoid an IRS Audit]

Source: Investing Answers

tax shelter

noun

English Language Learners Definition of tax shelter

: a way of investing money that reduces the amount of tax that has to be paid

See the full definition for tax shelter in the English Language Learners Dictionary

tax shelter

noun

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