Deferred Tax Liability


DEFINITION of 'Deferred Tax Liability'

An account on a company's balance sheet that is a result of temporary differences between the company's accounting and tax carrying values, the anticipated and enacted income tax rate, and estimated taxes payable for the current year. This liability may or may not be realized during any given year, which makes the deferred status appropriate.


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BREAKING DOWN 'Deferred Tax Liability'

Because there are differences between what a company can deduct for tax and accounting purposes, there will be a difference between a company's taxable income and income before tax. A deferred tax liability records the fact that the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable.

  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Liability

    A company's legal debts or obligations that arise during the ...
  4. Income Statement

    A financial statement that measures a company's financial performance ...
  5. Taxes

    An involuntary fee levied on corporations or individuals that ...
  6. Accountant

    A professional who performs accounting functions such as audits ...
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  1. What are some examples of a deferred tax liability?

    In the United States, laws allow companies to maintain two separate sets of books for financial and tax purposes. Because ... Read Full Answer >>
  2. What is the justification for allowing deferred tax liabilities?

    A deferred tax liability tracks the temporary difference that arises between a company's income taxes that will be due in ... Read Full Answer >>
  3. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
  4. How does a company derecognize a deferred tax liability?

    Under U.S. generally accepted accounting principles, or GAAP, deferred tax positions must be derecognized during the first ... Read Full Answer >>
  5. Can working capital be depreciated?

    Working capital as current assets cannot be depreciated the way long-term, fixed assets are. In accounting, depreciation ... Read Full Answer >>
  6. Do working capital funds expire?

    While working capital funds do not expire, the working capital figure does change over time. This is because it is calculated ... Read Full Answer >>

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