deferred tax asset

Definition

An asset that is used to reduce the amount of tax that a company will have to pay in a later tax period. It is often associated with a loss carryover, and is used as a future write-off if the next tax period is expected to produce positive earnings. The asset is kept on the balance sheet. For example, a deferred tax asset of $100,000 from the previous year could be applied to before-tax income of $250,000 this year, resulting in taxable income of $150,000 ($250,000 - $100,000).

Use deferred tax asset in a sentence

You should try to figure out how much of a deferred tax asset you have and see if you want to hold on.

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The deferred tax asset was especially useful as our balance sheet appreciated the asset's inclusion with the other tax burdening assets.

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After a great year in sales in 2014, my business partner and I decided to use a deferred tax asset on our balance sheets since we had a surplus of money. We used that same asset to pay off most of what we owed this year!

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