How Tax Shields Can Be Used to Reduce Income Tax
By: Jean Murray - February 14, 2018
What Is a Tax Shield?
A tax shield is a reduction in taxable income by taking allowable deductions that taxable income. AccountingTools says that a tax shield is "the deliberate use of taxable expenses to offset taxable income." While tax shields can be used for tax savings for both personal and business tax returns, this article focuses on tax shields for businesses.
- Increase expenses, but they lower taxable income.
- Decrease cash on hand, but they put money into investments that provide a higher return.
- The effective tax rate of the business
- The amount of the deduction
** Disclaimer Required by IRS Circular 230** Unless otherwise expressly approved in advance by the undersigned, any discussion of federal tax matters herein is not intended and cannot be used 1) to avoid penalties under the Federal tax laws, or 2) to promote, market or recommend to another party any transaction or tax-related matter addressed.