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What is a deferred tax liability?

A deferred tax liability is a tax that is assessed or is due for the current period but has not yet been paid. This will exist if future tax accounting income is less than future financial accounting income.

Another way of expressing deferred tax liabilities can be “if your taxable income (tax return income) is less today (aka you are paying less tax today)”.

This means that your tax deductions are greater today (and your taxable income is reduced), while your tax expenses would be less today, and would be recognized on the income statement at a later date. This would result in a deferred tax liability because you will be able to expense less taxes on the income statement at a later date.


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  • What is a permanent difference in tax accounting?

    Permanent differences are items of revenue and expenses that will either enter into pretax Generally Accepted Principles (GAAP) but won’t ever be allocated into taxable income. In addition, these differences won’t ever affect the deferred tax computation, and will only affect the current tax computation.