Deferred Tax Liabilities (DTLs)
Future Taxable Amounts
A deferred tax liability arises when taxable income is lower than book income today, resulting in lower current taxes but higher taxes in future periods. The company benefits from lower taxes now but will pay more taxes later.
- Accelerated tax depreciation.
- Installment sales recognized later for tax purposes.
- Revenue recognized later for tax than for financial reporting.
Tip
Deferred tax liabilities represent taxes that will likely be paid in future periods.
Summary
Deferred tax liabilities arise when taxes are postponed into future years.