Tax deferral is a strategy that allows individuals or businesses to postpone paying taxes on certain income, gains, or profits until a later date. Instead of paying taxes in the year the income is earned or the gain is realized, the taxpayer delays the tax liability, often to a time when they may be in a lower tax bracket or can better manage their cash flow. Tax-deferral methods are frequently employed in estate planning to benefit from a step-up in basis upon the investor’s death.
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