Definition - What does Tax Shelter mean?
A tax shelter is a place to put one's money in order to reduce the amount of taxes that one must pay. Tax shelters are completely legal, and they are usually investments or specific transactions. Tax shelters reduce the amount of taxes that one must pay by decreasing the amount of one's income that is considered taxable.
Justipedia explains Tax Shelter
Tax sheltering is different from tax evasion. Tax sheltering involves using the laws of the United States tax code to reduce one's taxes. Tax evasion involves lying about one's income or simply not paying the full amount of one's tax obligations. An example of a tax shelter that is used frequently is a 401k that is offered by an employer. Oftentimes, certain investment vehicles are offered as tax shelters in order to increase the incentive for people to put their money into them.
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