Tax Expense
The cost of income taxes on business profits, including both current taxes payable and deferred taxes from temporary differences between book and tax accounting.
Tax Expense
The cost of income taxes on business profits recorded on the income statement, including both current taxes payable for the period and deferred tax effects from temporary differences between financial reporting and tax accounting.
For example, a corporation with $1 million in pretax accounting income might record total tax expense of $250,000, comprising $200,000 in current taxes payable plus $50,000 in deferred tax expense from timing differences like accelerated tax depreciation.
Tax expense may differ from taxes payable due to permanent differences (like tax-exempt income) and temporary differences (like depreciation methods) between financial and tax accounting. The effective tax rate (tax expense divided by pretax accounting income) often differs from statutory rates due to these differences, tax credits, foreign operations, or changes in valuation allowances. Under accrual accounting, tax expense is recognized in the same period as the related income, regardless of when taxes are actually paid.