A deferred tax liability is a listing on a company’s balance sheet that records taxes that are owed but are not due to be paid until a future date.
The liability is deferred due to a difference in timing between when the tax was accrued and when it is due to be paid. For example, it might reflect a taxable transaction such as an installment sale that took place one a certain date but the taxes will not be due until a later date.
A deferred tax liability represents an obligation to pay taxes in the future.
The obligation originates when a company or individual delays an event that would cause it to also recognize tax expenses in the current period.
For instance, earning returns in a qualified retirement plan, like a 401(k), represents a deferred tax liability since the retirement saver will eventually have to pay taxes on the saved income and gains upon withdrawal.