alt Hacker NewsI'm not sure to understand how deferring taxes is a better deal than paying it here and now.
Since I'm not a financial adviser, someone asked me take on which 4k projector to buy last Xmas.
I explained that the tech has improved so much lately, they've become somewhat affordable, I recommended a model and pointed ou that he would certainly get a better device next Xmas, for half the price. I thought he would follow suit given his budget was a bit below the retail price. That would just wait.
His response was he would rather go ahead and up the budget a few hundred dollars to get it right away. That projectors will surely get much better by next year, but that he, certainly, will not.
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This is touched on briefly, the number one reason is that if you can keep deferring your taxes indefinitely then you never have to pay them. Your tax burden is wiped away on death so not only does it not matter to you but your heirs won't be affected either.
Not sure I understand your example. If you always wait for the new version of a product to release the following year then you are never going to buy anything.
In addition to the other reasons given: Sometimes it also makes sense if your income is lumpy and you e.g. expect to have years where your income will fall into a lower tax band. It then can pay to suddenly recognise more income to take out as much as you can within the lower band.
Suppose I defer $1 million in taxes until after I'm dead, and my estate conveniently does not have $1 million in assets left. What happens?
In the meantime, I gave all the assets to my children while I was alive
The answer is nothing. The government eats the loss.
Because of cost basis step up at death, you can just defer forever.
The projector prices are a scam except for Christie and Barco
Deferring taxes is essentially an interest-free loan from the government to you. You can take that money, invest it, and then keep most of the earnings when you eventually pay the taxes.
There are also some loopholes where capital gains taxes deferred until after death just don't get paid at all. This is the "step-up basis" where your inheritors get to reset the basis of capital assets and neither you nor they has to pay taxes on the capital gain.