Tax shield


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Tax shield

The reduction in income taxes that results from taking an allowable deduction from taxable income.

Tax Shield

The reduction of one's taxable income as the result of a properly qualified deduction. Examples of tax shields include mortgage interest deductions, charitable donations, and others. The mortgage interest deduction is a particularly important tax shield to middle-class households because the value of their properties constitutes the greatest part of their net worths. Creating tax shields is also important to wealthy individuals to help them avoid as many taxes as possible.
References in periodicals archive ?
Moreover this table includes mean, median, maximum and minimum, standard deviation, sum and observation of control variables such as firm size, tax shield, growth opportunity, firm profitability, asset tangibility, assets maturity and earning volatility.
Lower adjusted results for the quarter compared to last year were driven by higher depreciation and amortization expense on a growing asset base, higher storm-related costs and a lower tax shield on holding company interest as a result of the Tax Act; partially offset by higher rider revenues.
This gives a present value of the tax shield from expensing of
Saving for retirement is a good idea, of course, but if you time things right and do your homework, some of your nest egg could also do double duty as a tax shield. Here are two simple savings maneuvers that tax pros say could also lower your tax bill if you make them in time.
Because of tax shield on interest, the presence of debt in total capital of firm reduces the tax liability of the firm.
You spoke in your remarks to the Business days of tax shield. What is it exactly?
To measure the "tax shield" incentive we use the following variable (similar to Grace, 1990; Grace and Leverty, 2012):
Based on a set of assumptions regarding the structure of the tax shield and of the structure of the distress costs which are standard in the literature (Leland, 1994; Koziol, 2014), the model we propose is mathematically tractable and can be used in practical applications to value leveraged firms and determine the optimal financial structure.
Leverage level of firms are expected to rise with increase in interest rates because there will be tax shield advantages to exploit, at the same time some firms may reduce their financial leverage with rise in interest rates in order to reduce bankruptcy costs.
A fixed effects panel estimation model reveals that key determinants are tangibility (+ve), size (+ve), profitability (-ve) and non-debt tax shield (-ve), which are similar to those identified in earlier studies in the context of other economies.
The key benefits of debt are associated with the tax shield while the costs can be divided into potential bankruptcy costs and agency costs.
Finally, non-debt tax shield (NDTS) and dividend (DIV) are used for the effects of taxes.