Any financial investment made in order to acquire expenses, depreciation allowances, etc. or to defer income, as in an IRA or Keogh plan, so as to reduce one's income tax.
Webster's New World
A transaction or investment by which a taxpayer shelters some or all income from tax liability because of tax credits or applicable deductions. Abuses of tax shelters resulted in extensive reform of the Internal Revenue Code, restricting loss from a business or an investment to only the capital that is at risk. This greatly reduced the availability of tax shelters.