Define: Tax Shield

UK Accounting Glossary

Definition: Tax Shield



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Full Definition of Tax Shield


A tax shield is a legal means of reducing income in order to protect it from taxation.

In that sense, a tax shield is the same as a tax deduction, except that a tax shield can also encompass deferments of income to future years. Any individual or business is eligible to use a tax shield. Donations to charity can be used as a tax shield, as can medical expenses, mortgage interest, interest on many business loans, business losses, and amortization and depreciation. Interest from a car loan or credit cards might be usable as a tax shield if the principle expense was incurred doing business. Child care and child education expenses are tax-deductible in some states and therefore usable as a tax shield. Some states also offer a tax shield to renters in the form of renter’s credits, but these are often much smaller than the deduction for mortgage expense. Interest from a personal loan may not be used as a tax shield.


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Tax Shield. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. March 29, 2020 https://payrollheaven.com/define/tax-shield/.
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Tax Shield. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/tax-shield/ (accessed: March 29, 2020).
American Psychological Association (APA):
Tax Shield. PayrollHeaven.com. Retrieved March 29, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/tax-shield/

Definition Sources


Definitions for Tax Shield are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 5th February 2020.