Which term refers to the opportunity for tax sheltering associated with an investment in income-producing property?

The term that refers to the opportunity for tax sheltering associated with an investment in income-producing property is depreciation.

Depreciation allows property owners to deduct a portion of the property’s cost over time when calculating taxable income. This is particularly relevant for income-producing real estate, as it reduces the taxable income generated from rental properties, leading to a lower overall tax liability. By using depreciation, investors can effectively shelter part of their income from tax, making it a valuable financial strategy in real estate investment. This process recognizes the wear and tear on the property and allows for the allocation of costs over the useful life of the property, which provides a significant tax benefit to investors in income-producing properties.

Other terms like appreciation refer to the increase in property value over time and do not directly involve tax benefits. Exemption typically refers to circumstances where specific income or property is excluded from taxation, but it does not relate to an ongoing tax benefit like depreciation. Deferral might suggest postponing the tax liability, but it does not capture the specific tax sheltering opportunity that depreciation provides.