Define: Deferral State

A deferral state is a state that allows individuals to defer payment of certain taxes, such as income or property taxes, to a later date.

Qualifications for tax deferral vary by state, but generally, individuals must meet certain age or income requirements to be eligible for tax deferral.

The main benefit of tax deferral is that it allows individuals to postpone payment of taxes, providing them with more financial flexibility in the short term.

One potential drawback is that deferred taxes will eventually need to be paid, often with interest, so individuals should carefully consider their ability to pay the deferred taxes in the future.

Not all taxes may be eligible for deferral in a deferral state. It’s important to check with the state’s tax authority to determine which taxes are eligible for deferral.

The process for applying for tax deferral varies by state, but generally, individuals must submit an application to the state’s tax authority and provide documentation to support their eligibility.

If you qualify for a tax refund, you may still receive it even if you have deferred payment of other taxes in a deferral state.

If you are unable to pay the deferred taxes when they come due, you may face penalties and interest charges, and the state may take legal action to collect the unpaid taxes.

Some states offer alternative programs, such as tax installment plans, that allow individuals to pay their taxes in smaller, more manageable installments rather than deferring payment altogether.

Tax deferral programs are specific to each state, so if you move to a different state, you will need to reapply for tax deferral in that state if you wish to continue deferring payment of taxes.