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LSDefine
Simple English definitions for legal terms
tax-deferred
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A quick definition of tax-deferred:
Tax-deferred means that you don't have to pay taxes on something until a later time or event. For example, a tax-deferred retirement plan lets you save money for retirement without paying taxes on it until you withdraw the money later on. This can be a good way to save money and reduce your taxes in the long run.
A more thorough explanation:
Definition: Tax-deferred means that taxes on something, such as income or investments, are not paid until a later date or event.
Example: A tax-deferred retirement plan is a type of savings account where you can put money away for retirement without paying taxes on it until you withdraw the money. This means that you can save more money for retirement because you don't have to pay taxes on it right away.
Another example: An annuity is another type of tax-deferred investment. When you buy an annuity, you put money into an account that earns interest over time. You don't have to pay taxes on the interest until you withdraw the money.
These examples illustrate how tax-deferred means that taxes are postponed until a later date or event. This can be beneficial because it allows you to save more money or earn more interest without having to pay taxes right away.