When deferred taxes are due depends entirely on the type of deferral. Some come due when you take a specific action, like withdrawing from a retirement account or selling a replacement property. Others hit on a fixed calendar date no matter what you do. And a few run on a schedule you set up in advance, such as installment sales or estate tax payments for a closely held business. The categories below cover the main deferrals individuals encounter, with the trigger and the cost of missing it for each.
Retirement Account Withdrawals
Traditional IRAs and 401(k)s defer tax on contributions and growth until you take money out. The IRS forces that eventually through required minimum distributions, which start at age 73.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs For people who turn 73 after 2032, the age rises to 75, giving anyone born in 1960 or later a couple more years of deferral.
The annual withdrawal is calculated from IRS life expectancy tables. Skip a distribution or take less than required and you owe a 25% excise tax on the shortfall, dropping to 10% if you correct within two years.1Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs
Early Withdrawals Before Age 59½
Pulling money out before 59½ ends the deferral on the spot. The distribution is added to that year’s taxable income, and a 10% additional tax applies on top of regular income tax.2Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions Exceptions cover situations like disability or substantially equal periodic payments, but there is no general hardship exception for IRAs.3Internal Revenue Service. IRA FAQs – Distributions (Withdrawals) The additional tax is reported on Form 5329 and due with your return for the year of the distribution.4Internal Revenue Service. Instructions for Form 5329 (2025)
Inherited IRAs and the 10-Year Rule
If you inherited a retirement account from someone who died in 2020 or later, and you are not a spouse, minor child, disabled individual, or within ten years of the deceased’s age, the account must be fully emptied by the end of the tenth year after the original owner’s death.5Internal Revenue Service. Retirement Topics – Beneficiary Each withdrawal is taxable in the year taken. Waiting until year ten to pull everything at once can push you into a much higher bracket; spreading the withdrawals across the decade usually costs less overall.
Section 1031 Like-Kind Exchange Deadlines
A 1031 exchange defers capital gains on investment or business real estate as long as you meet two firm deadlines. You have 45 days after closing to identify replacement properties in writing. The replacement purchase must then close within 180 days of the sale, or by your tax return due date for that year including extensions, whichever comes first.6Office of the Law Revision Counsel. 26 USC 1031 – Exchange of Real Property Held for Productive Use or Investment Filing a return extension preserves the full 180 days.
Miss either deadline and the full deferred gain becomes taxable in the year of the original sale. Long-term capital gains rates of 0%, 15%, or 20% apply based on income, and higher earners also owe the 3.8% net investment income tax.7Internal Revenue Service. Net Investment Income Tax Any depreciation previously claimed is recaptured at a maximum 25% rate.8Internal Revenue Service. Capital Gains and Losses Successful exchanges are reported on Form 8824, which also sets the basis of the replacement property.9Internal Revenue Service. Instructions for Form 8824 (2025)
Opportunity Zone Investments
Gains rolled into a Qualified Opportunity Fund have a hard expiration date: December 31, 2026. On that date, any remaining deferred gain is added to your taxable income whether or not you have sold your fund position.10Internal Revenue Service. Opportunity Zones Frequently Asked Questions Tax on that included gain is due when you file your 2026 return, meaning April 2027 for most filers.
Investors who held their fund position at least five years before the deadline get a 10% reduction in the taxable amount; those who reached seven years get 15%. Anyone who invested after late 2019 cannot hit the seven-year mark in time. A separate benefit survives: hold the fund for at least ten years and you can elect to step up basis to fair market value, permanently excluding the fund’s own appreciation from tax.11Internal Revenue Service. Invest in a Qualified Opportunity Fund That ten-year exclusion still applies after the 2026 inclusion event, because it covers growth inside the fund rather than the original deferred gain.
Installment Sales
Sell property and take payments over multiple years and you can report the gain as payments arrive rather than all at once. This treatment applies automatically for qualifying sales unless you elect out on the return for the year of sale.12Internal Revenue Service. About Form 6252, Installment Sale Income Each year you collect a payment, the taxable portion goes on Form 6252 with that year’s return.
Bigger sellers pay a surcharge. When the sale price exceeds $150,000 and your outstanding installment obligations from the year top $5 million, the IRS charges interest on the deferred tax balance for as long as it remains outstanding.13Office of the Law Revision Counsel. 26 USC 453A – Special Rules for Nondealers The interest is designed to offset the time value of the deferral.
Estate Tax Deferral for Closely Held Businesses
When a decedent’s estate includes a substantial interest in a closely held business, the executor can elect to pay the federal estate tax in installments. The business interest must exceed 35% of the adjusted gross estate. “Closely held” generally means a sole proprietorship, a partnership or corporation with 45 or fewer owners, or one where the estate holds at least 20% of ownership.14Office of the Law Revision Counsel. 26 USC 6166 – Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business
The first installment can be postponed up to five years after the normal estate tax due date, with only interest paid in the meantime. After that, the estate pays over as many as ten annual installments, creating a possible 14-year window from the original due date.15Office of the Law Revision Counsel. 26 USC 6166 – Extension of Time for Payment of Estate Tax Where Estate Consists Largely of Interest in Closely Held Business Part of the deferred tax qualifies for a reduced 2% interest rate, with the rest charged at 45% of the standard underpayment rate. Selling the business, or a significant portion of it, during the deferral period accelerates the remaining tax and makes it due immediately.
Private Company Stock Under Section 83(i)
Employees of eligible private companies who get stock through options or RSUs can elect under Section 83(i) to defer income tax past the vesting date. The deferral runs up to five years.16Office of the Law Revision Counsel. 26 USC 83 – Property Transferred in Connection with Performance of Services The company must grant stock to at least 80% of its U.S. employees that year, and the stock cannot be publicly traded.
The deferral ends at the earliest of these events: the stock becomes transferable, you leave and become an “excluded employee,” the company goes public, you revoke the election, or five years pass.16Office of the Law Revision Counsel. 26 USC 83 – Property Transferred in Connection with Performance of Services The taxable amount is fixed at the stock’s value on the vesting date, not on the date tax is actually paid. That can help if the stock has since dropped and hurt if you owe tax on value you cannot liquidate.
Property Tax Deferrals
Many local governments let qualifying homeowners postpone property tax payments. Eligibility usually covers seniors, disabled veterans, and people with permanent disabilities under set income limits. Deferred taxes accrue interest and become a lien against the property. Rates vary widely, from nothing in some states to 7% or more in others.
Full payment comes due when you sell the home, stop using it as your primary residence, or pass away. The balance is then settled from the sale proceeds or the estate, usually within a short window set by the local tax office. The debt grows every year it sits, so it can meaningfully cut into the equity available to you or your heirs when the property changes hands.
Estimated Tax When Deferred Income Comes Due
A large deferred tax hitting in a single year rarely lines up with your regular withholding. A failed 1031 exchange, the 2026 opportunity zone inclusion, or a big year-ten distribution from an inherited IRA can all leave you short. To avoid an underpayment penalty, you generally need to pay at least 90% of your current-year tax liability through withholding and estimated payments, or 100% of your prior-year liability (110% if your adjusted gross income exceeded $150,000).17Internal Revenue Service. Pay As You Go, So You Won’t Owe – A Guide to Withholding, Estimated Taxes, and Ways to Avoid the Estimated Tax Penalty
For a scheduled event like the 2026 opportunity zone inclusion, plan the fourth-quarter estimated payment in advance. For an unscheduled one, the annualized income installment method lets you weight payments to the quarter when the income actually landed, which can reduce or eliminate the penalty on earlier quarters.