Definition
Income tax that will be paid or recovered in a future period because of temporary differences between book income (GAAP) and taxable income (tax law). A deferred tax liability arises when taxable income is lower than book income today, often because of accelerated tax depreciation; a deferred tax asset arises in the reverse case.
Formula
Deferred Tax = Temporary Difference × Tax Rate
Example
Tax depreciation exceeds book depreciation by $10,000 and the tax rate is 21% → a $2,100 deferred tax liability.