Book income ≠ taxable income That timing difference creates deferred taxes. Deferred Tax Asset (DTA) • You paid more tax now than book expense • You’ll pay less tax later • Examples: NOLs, warranty reserves, bad debt Deferred Tax Liability (DTL) • You paid less tax now than book expense • You’ll pay more tax later • Example: accelerated tax depreciation Key rule to remember: • DTA = future tax benefit • DTL = future tax payment • It’s all about timing, not total taxes #finance #investmentbanking