what is a deferred tax asset 
a deferred tax asset is an item on a company s balance sheet that reduces its taxable income in the future such a line item asset can be found when a business overpays its taxes this money will eventually be returned to the business in the form of tax relief therefore the overpayment becomes an asset to the company a deferred tax asset is the opposite of a deferred tax liability which indicates an expected increase in the amount of income tax owed by a company understanding deferred tax assetsa deferred tax asset is often created when taxes are paid or carried forward but cannot yet be recognized on the company s income statement for example deferred tax assets can be created when the tax authorities recognize revenue or expenses at different times than the periods that the company follows as an accounting standard these assets help reduce the company s future tax liability it is important to note that a deferred tax asset is recognized only when the difference between the loss value or depreciation of the asset is expected to offset its future profit 2a deferred tax asset might be compared to rent paid in advance or a refundable insurance premium while the business no longer has the cash on hand it does have its comparable value and this must be reflected in its financial statements investopedia s tax savings guide can help you maximize your tax credits deductions and savings order yours today examples of deferred tax assetsone straightforward example of a deferred tax asset is the carryover of losses if a business incurs a loss in a financial year it usually is entitled to use that loss to lower its taxable income in the following years 3 because the loss will save the company money on its taxes in the future the loss becomes an asset another scenario arises when there is a difference between accounting rules and tax rules for example deferred taxes exist when expenses are recognized in a company s income statement before they are required to be recognized by the tax authorities or when revenue is subject to taxes before it is taxable in the income statement essentially whenever the tax base or tax rules for assets and or liabilities are different there is an opportunity for the creation of a deferred tax asset there is no time limit on deferred tax assets they can be used when it makes the most financial sense for a company however deferred tax assets can t be used with tax returns that have already been filed 