Value of Deferral

What is postponing a tax bill actually worth? The answer depends on your reinvestment rate, the deferral period, and the rate you ultimately pay.

Inputs

Tax deferred ($)

After-tax reinvestment rate (%)

Years of deferral

Rate at exit vs. today (%, 100 = unchanged)

Estimate

Updates as you type. Simplified estimate; assumptions below.

Deferred tax grows to-

Tax due at exit-

Net benefit at horizon-

Present value of the benefit-

Per year, per dollar deferred-

Assumptions and limits. Models deferral as investing the postponed tax at your after-tax rate and settling the liability at the horizon, scaled by any change in the applicable rate. A step-up at death or a later exclusion is the 0% exit-rate case. Ignores interim distribution requirements and structure costs, which reduce the realized benefit. Estimates are educational, not advice or a projection. State taxes, alternative minimum tax, phase-outs, and individual facts can change results materially.

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The real model includes your state, basis lots, AMT position, and the strategies interacting with each other.

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