Categories: General Tax Terms
Tax Shelter: A tax shelter is a financial strategy or investment that reduces or eliminates taxable income, thereby lowering the overall tax liability for individuals or businesses.
Tax shelters can take various forms, including retirement accounts (like 401(k)s and IRAs), certain types of insurance policies, and investments in real estate or qualified business ventures. The aim is to defer taxes on earnings or gain tax-free benefits, allowing for potential growth of the investment without immediate tax consequences. For example, contributions to a traditional IRA may be deducted from taxable income, reducing the amount of income subject to taxes in the current year.
« Back to Glossary Index