What is tax deferred? whats it mean??

Question

What is tax deferred? whats it mean??

Answer 1

Tax deferred simply means that the tax is put off to a future date.  An excellent example is a Traditional IRA.  You put the money in today and take a deduction for the contributions.  The contributions  and any income accumulates tax deferred until you remove them from the account at some time in the future.  At that time, the withdrawals are taxed as ordinary income.

Answer 2

Tax deferred means that the the income tax liability is being put off to some future event that makes those funds taxable.  Normally this is in some type of retirement fund like a 401k.  You put that money in the 401k now and you don't have to pay any income tax on it until there is a disbursment of that money to you.