Tax Shelter

A legal strategy to reduce taxable income.

QUICK ANSWER

A Tax Shelter is a legal method used to reduce taxable income through deductions, credits, or investment strategies.

In depth

Tax Shelters are financial arrangements designed to minimize tax liability by taking advantage of deductions, credits, or deferrals allowed under tax laws. Common examples include retirement accounts, depreciation, and certain investment structures. While tax shelters are legal, aggressive or abusive shelters can attract scrutiny from tax authorities. For founders and investors, using legitimate tax shelters can improve after-tax returns and support long-term financial planning.