Future Income Tax

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DEFINITION

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.

INVESTOPEDIA EXPLAINS

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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