tax-deferred

1. Of or relating to an investment that is not liable to taxation until income is withdrawn or an appointed date is reached.
2. Of or relating to the income that such an investment generates prior to becoming subject to taxation.

Refers to investment earnings such as interest, dividends or capital gains that accumulate free from taxation until the investor withdraws and takes possession of them. The most common types of tax-deferred investments include those in individual retirement accounts (IRAs) and deferred annuities.

Investopedia Says:
By deferring taxes on the returns of an investment, the investor benefits in two ways. The first benefit is tax-free growth: instead of paying tax on the returns of an investment, tax is paid only at a later date, leaving the investment to grow unhindered. The second benefit of tax deferral is that investments are usually made when a person is earning higher income and is taxed at a higher tax rate. Withdrawals are made from an investment account when a person is earning little or no income and is taxed at a lower rate.

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Term describing an investment whose accumulated earnings are free from taxation until the investor takes possession of them. For example, the holder of an Individual Retirement Arrangement postpones paying taxes on interest, dividends, or capital appreciation if he or she waits until after age 591⁄2 to cash in those gains. Other examples of tax-deferred investment vehicles include Keogh Plans; Annuities; Variable Life Insurance; Whole Life Insurance; and Universal Life Insurance; Stock Purchase or Dividend Reinvestment Plans; Simple Iras; Salary Reduction Plans and Series Ee and Series Hh U.S. Savings Bonds.

Refers to an investment whose accumulated earnings are free from taxation until the investor takes possession of the assets. See also Tax-Deferred Annuity; Tax-Deferred Exchange.