A tax shelter is a method for reducing taxable income by investing in certain protected asset categories. There are legal and illegal tax shelters. The goal of a tax shelter is to create economic value with an investment by using the incentive of a lower tax liability. Illegal tax shelters include many offshore bank accounts used to avoid domestic taxes. These are deemed to avoid the fair market value for the financial assets involved. Some countries are forbidding American customers due to the interference of the IRS in reclaiming tax revenue from American citizens. These might involved heavy reporting regulations that are deemed to be too intrusive. Legal tax shelters include limited partnerships, retirement plans and socially beneficial investments. Governments encourage investors to support certain public goods with legal tax shelters. The lower tax liabilities are attractive to wealthy individuals and corporations.
