Tax Shelter
TaxGlossary term
Definition
A legal strategy or financial arrangement used to reduce taxable income or defer taxes. Common tax shelters include retirement accounts, real estate investments, and certain business structures. Aggressive or abusive shelters may attract IRS scrutiny.
Related terms
- Tax DeductionAn expense that can be subtracted from gross income to reduce taxable income. Common deductions include mortgage interest, student loan interest, and charitable contributions.
- Tax-Deferred AccountAn investment account where taxes on contributions and earnings are postponed until money is withdrawn, typically in retirement. Examples include traditional IRAs and 401(k) plans, which allow investments to grow without annual tax drag.
- Tax BracketThe range of income subject to a certain income tax rate in the progressive US tax system. Higher income levels are taxed at higher rates (marginal tax rates).
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