Definition Deferred Tax Asset

A Deferred Tax Asset is an accounting term on a firm's balance sheet that is used to illustrate when a firm has overpaid on taxes and is due to some form of tax relief.

With deferred tax assets, the firm will have either paid taxes early, or have paid too much tax, and is therefore entitled to some money back from the tax authorities. Deferred tax assets can be used when the company carries over a net loss, but only when there is a greater than 50% chance that the company's accounting income will be positive in the next reporting period.