tax-sheltered income

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Tax-Sheltered Income

Income that would normally be taxable but because of a non-cash deduction, notably depreciation, is not taxed. For example, income from the lease of a car where the lessor maintains title to the car can be tax-sheltered income because of the depreciation on the value of the car.

tax-sheltered income

The income that is received and would ordinarily be taxable but, because of certain noncash deductions such as depreciation, is protected from taxation. For example, rent that has been earned from a rental property is generally sheltered by depreciation on the property. Compare tax-deferred income, tax-free income.