--- title: Tax Deferred Definition | What Does Tax Deferred Mean? description: Tax deferred is an instance where investment earnings such as interest, dividends, or capital gains accumulate tax-free until the payment of taxes related to the investment is triggered by some taxable event in the future. image: https://www.realized1031.com/hubfs/social-suggested-images/Realized_Glossary_Graphic-2.jpg --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Tax Deferred Tax deferred is an instance where investment earnings such as interest, dividends, or [capital gains](https://www.realized1031.com/glossary/capital-gain) accumulate tax-free until the payment of taxes related to the investment is triggered by some taxable event in the future. Real estate investments may defer certain taxes including [capital gains](https://www.realized1031.com/glossary/capital-gain-tax) and [depreciation recapture](https://www.realized1031.com/glossary/depreciation-recapture) via a [1031 exchange](https://www.realized1031.com/glossary/1031-exchange). Note that tax deferral does not alleviate an investor from the tax obligations - it simply defers the timing of tax payment to a later date. For example, a real estate investor who completes a 1031 exchange at the sale of their [relinquished](https://www.realized1031.com/glossary/relinquished-property) investment property is able to defer the taxes due until the eventual sale of the [replacement property](https://www.realized1031.com/glossary/replacement-property). Due to the concept of [time value of money](https://www.realized1031.com/glossary/time-value-of-money-tvm), the ability to defer taxes is generally considered an attractive characteristic of an investment. 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