Tax Shelter
A legal method of minimizing or decreasing an investor's taxable income and, therefore, his or her tax liability. Tax shelters can range from investments or investment accounts that provide favorable tax treatment, to activities or transactions that lower taxable income. The most common type of tax shelter is an employer-sponsored 401(k) plan. Investopedia Says:
Tax authorities watch tax shelters carefully. If an investment is made for the sole purpose of avoiding or evading taxes, you could be forced to pay additional taxes and penalties. Tax minimization (also referred to as tax avoidance) is a perfectly legal way to minimize taxable income and lower taxes payable. Do not confuse this with tax evasion, the illegal avoidance of taxes through misrepresentation or similar means. Related Terms:
Custom Adjustable Rate Debt Structure - CARDS
Employer-Sponsored Plan
Income Shifting
Internal Revenue Service - IRS
Offshore Portfolio Investment Strategy - OPIS
Tax Avoidance
Tax Evasion
Tax Haven
Tax Shield
Tax-Sheltered Annuity |