Butter & Jelly reduced its taxes last year by $350 by increasing its interest expense by $1,000.Which of the following terms is used to describe this tax savings?

Question

Quizplus · Accepted Answer

The term used to describe this tax savings is the interest tax shield. This is because the increase in interest expense allowed Butter & Jelly to deduct a larger amount from their income, resulting in a lower taxable income and ultimately reducing their taxes.

Butter & Jelly Reduced Its Taxes Last Year by $350