Tax Deferral Law and Legal Definition

Tax deferral means the postponement or delay in paying taxes by the taxpayer to a future period. Theoretically, the net taxes paid must be the same. Qualified retirement plans such as individual retirement accounts (IRAs) and deferred annuities, and return on investments such as accrued interest, dividends and capital gains are examples for tax deferral. By tax deferral on the return on investment, the taxpayer can ensure a tax-free growth of the investment. Moreover, the taxpayer gets an opportunity to calculate the exact tax amount on the returns of an investment.