what is deferred income tax 
a deferred income tax is a liability recorded on a balance sheet resulting from a difference in income recognition between tax laws and the company s accounting methods for this reason the company s payable income tax may not equate to the total tax expense reported 1the total tax expense for a specific fiscal year may be different from the tax liability owed to the internal revenue service irs as the company is postponing payment based on accounting rule differences 2zoe hansen investopediaunderstanding deferred income taxin the u s generally accepted accounting principles gaap guide financial accounting practices gaap accounting requires the calculation and disclosure of economic events in a specific manner income tax expense which is a financial accounting record is calculated using gaap income in contrast the irs tax code specifies special rules on the treatment of events the differences between irs rules and gaap guidelines result in different computations of net income and subsequently income taxes due on that income 2a deferred income tax liability results from the difference between the income tax expense reported on the income statement and the income tax payable situations may arise where the income tax payable on a tax return is higher than the income tax expense on a financial statement in time if no other reconciling events happen the deferred income tax account would net to 0 however without a deferred income tax liability account a deferred income tax asset would be created this account would represent the future economic benefit expected to be received because income taxes charged were in excess based on gaap income 1example of deferred incomea common situation that generates a deferred income tax liability is from differences in depreciation methods gaap guidelines allow businesses to choose between multiple depreciation practices however the irs requires the use of a depreciation method that is different from all available gaap methods 34for this reason the amount of depreciation recorded on a financial statement is usually different from the calculations found on a company s tax return over the life of an asset the value of the depreciation in both areas changes at the end of the life of the asset no deferred tax liability exists as the total depreciation between the two methods is equal 