Future Income Tax

DEFINITION of 'Future Income Tax'

Income tax that is deferred because of discrepancies between a company's tax return and the tax calculated on the company's financial statements. Future income tax occurs when there is a greater amount of deductions on taxable income than on the net income that is calculated on a company's income statement.

BREAKING DOWN 'Future Income Tax'

In simple terms future income tax is an adjustment accounting for the difference between what the company has already paid in taxes on the current income and what they will have to pay in the future for this income. This difference occurs because companies are taxed by government in a different way than from the way they calculate tax on their accounting records.

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RELATED FAQS
  1. How are effective tax rates calculated from income statements?

    Learn how to read an income statement and how to find the information necessary to calculate a company's effective income ... Read Answer >>
  2. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
  3. What is the income breakdown for the effective tax rate?

    Read about the effective tax rate, how the marginal income tax brackets affect it and how the denominator in its formula ... Read Answer >>
  4. How can I lower my effective tax rate without lowering my income?

    Discover how to reduce your effective tax rate without losing income by maximizing adjustments and deductions, earning tax-free ... Read Answer >>
  5. Do tax liabilities appear in the financial statements?

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  6. Is the marginal tax rate a progressive tax?

    Learn how the marginal tax rate is a progressive tax that takes a higher percentage of income tax from high-income earners ... Read Answer >>
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