What is typically included in a deferred tax asset?

A deferred tax asset is recognized for future tax benefits that are expected to reduce taxable income in future periods. This primarily arises from temporary differences, which occur when income is recognized for accounting purposes before it is recognized for tax purposes, or when expenses are recognized for tax purposes before being recognized for accounting purposes.

Specifically, option B highlights future tax deductions that result from these temporary differences. These deductions can create a situation where the entity will pay less tax in the future compared to its taxable income reported in the current accounting period, thus justifying the recognition of a deferred tax asset.

In contrast, tax credits that reduce taxable income, while beneficial, do not create a deferred tax asset; they are recognized as a reduction in taxes payable rather than an asset. Current tax liabilities refer to taxes currently owed and are not considered deferred taxes, as they do not represent future benefits. Therefore, the correct answer effectively captures the essence of what constitutes a deferred tax asset in accounting practice.