What creates a deferred tax liability?

When taxable income is lower than GAAP income in the current period. Most common cause: accelerated MACRS tax depreciation vs straight-line GAAP depreciation.

Does a deferred tax liability require a cash payment?

Eventually yes, but not today. It represents future taxes payable when the temporary difference reverses. For companies growing capex, the DTL may never be fully paid as new accelerated depreciation continuously offsets reversals.

Is a deferred tax liability a real cost in valuation?

In DCF valuation, DTLs are typically excluded from invested capital and not deducted from EV because they are non-interest-bearing. In LBO models, they are sometimes included in total leverage.

Deferred Tax Liability Calculator

Calculate deferred tax liabilities arising from temporary differences: accelerated tax depreciation, installment sales, prepaid income. Shows timing of future tax payments.

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Frequently Asked Questions

What creates a deferred tax liability?

Does a deferred tax liability require a cash payment?

Is a deferred tax liability a real cost in valuation?