Tax shelter

In general, a tax shelter is any organized program in which many individuals, rich or poor, participate to reduce their taxes due. However, a few individuals stretch the limits of legal interpretation of the income tax laws. Are tax shelters illegal?

What is a good tax shelter? Tax shelters can range from investments or investment accounts that provide favorable tax treatment, to activities or transactions that lower taxable income. After receiving much attention in the news in recent years, the term tax shelter has a negative connotation relating to deceptive and illegal schemes to evade income tax. A tax shelter is any legal strategy you employ to reduce the amount of income taxes you owe. For example, making a donation to a qualified charity, itemizing your deductions and deducting that donation reduces your tax liability in that year.

Here are five legal ways for just about everyone to minimize taxes and save more money. The lower your taxable income, the less you pay in taxes. When you use a legal, legitimate tax shelter , you are avoiding taxes, which should not be confused with evading taxes. There are many legitimate tax shelters. But, as with most things, tax shelters can be used for wrongdoing.

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