Deferred Tax Asset Payback Calculator
Estimate how quickly your net operating loss carryforward or deferred tax asset will be realized. Enter the carryforward balance and projected taxable income to see the tax shield each year, the years required to use it, and the present value of those savings at your chosen discount rate.
Use for planning only; confirm NOL carryforward limits, expiration rules, and valuation allowance considerations with your tax advisor.
Examples
- $750,000 NOL with $250,000 of annual taxable income, 25% tax rate, and 8% discount rate ⇒ Undiscounted tax saved: $187,500.00 USD | Years to fully use NOL: 3.00 years | Present value of tax shields @ 8.00%: $161,068.56 USD | Modeled annual tax shield: $62,500.00 USD.
- $1,200,000 NOL with $180,000 of annual taxable income, 28% tax rate, 6% discount rate ⇒ Undiscounted tax saved: $336,000.00 USD | Years to fully use NOL: 6.67 years | Present value of tax shields @ 6.00%: $270,179.07 USD | Modeled annual tax shield: $50,400.00 USD.
FAQ
What happens if my taxable income changes each year?
This model assumes steady taxable income. If you expect volatility, rerun the calculator with a lower income for conservative planning or a weighted average of projected years.
Why do I need a discount rate?
Discounting turns future tax savings into today's dollars, showing whether deferring taxes is worth more or less than immediate cash outflows elsewhere in your business.
Can I use it for deferred tax assets beyond NOLs?
Yes. Any deferred tax asset that is realized as taxable income is generated can be modeled by substituting its balance for the NOL amount and applying the relevant effective tax rate.
Additional Information
- Assumes a constant annual taxable income stream absorbing the carryforward until it is fully utilized.
- Tax shield is computed as taxable income multiplied by the effective tax rate until the carryforward balance reaches zero.
- Present value discounts each year's tax shield at the provided rate; leaving the rate blank applies an 8.00% default.
- Results are expressed in USD with two decimal places for easy comparison against provision schedules.