A tax delayed is a tax reduced, when you consider the time value of money. That helps explain why many a highly touted tax dodge is nothing more than a postponement of the day when you have to send the Internal Revenue Service a check. The idea is to get what is, in effect, an interest-free loan from the government.

There are, however, times when deferral can backfire and end up costing you more. This survey of deferral techniques covers some that work, one that merits a careful look before you make a decision and one that is strictly for dimwits.

### DO IT

Clever trading: The old adage that it's smart to sell your losers and let your winners ride is usually a wise formula for deferring taxes. In rare circumstances it's wise to do the reverse: to recognize a gain as quickly as possible. That's true if you have an asset you know you'll have to sell in the next few years and your tax bracket is going up.

If you're like most investors, however, you'll be better off not selling a winner. Instead, give it to a charity or a low-bracket relative or leave it in your estate.

Charitable gift funds: When you accelerate deductions you defer your tax bill. And there's an easy way to accelerate deductions for charitable contributions, by using a gift fund.

Instead of donating $2,000 a year, you could get ten years' worth of deductions at once by putting $20,000 into a charitable gift fund of the sort managed by Fidelity Investments and Charles Schwab ( SCHW - news - people ). Your money is invested in mutual funds and gets dished out according to your instructions.

Suppose you'll be disbursing $500 of the money to the PTA in 2021 and your chosen fund has the prospect of doubling in value in the next decade. The gift fund allows you to fund your donation with $250 in cash today. You wind up with an immediate $250 deduction in lieu of a $500 tax deduction in 2021.

So far, tax deferral is not putting you ahead. But the charitable fund may still make sense. Inside Fidelity's philanthropic arm your money is sheltered from income tax on fund distributions. If you kept ownership of the $20,000 until releasing it, you'd probably be paying out close to 1% of your assets a year in taxes. (The amount avoided depends on how you invest and on your state and federal tax brackets.)

Offsetting this tax savings is the fee charged for the service. Fidelity and Schwab each assess charitable accounts 0.6% a year, in addition to the cost of underlying mutual funds.

Still no big win for the gift option. Unless, that is, you fund the account with appreciated securities instead of cash, which enables you to escape capital gains tax. Yes, you could deliver appreciated securities directly to the PTA, but the paperwork isn't going to be worth it for a $500 donation.

Real estate: You buy commercial real estate (a share in an office building partnership, perhaps) for $100,000 and collect $6,000 a year in rent, after expenses. The IRS lets you write off $2,500 a year in paper depreciation costs. That means you pay tax, for now, on only $3,500 a year.

The depreciation gives you a temporary escape from taxes on $2,500 of annual income. If you keep this up for ten years and sell for the same $100,000, then you have a $25,000 gain to account for. That's because rather than providing you with a permanent free lunch, the depreciation deductions have reduced your "cost basis" in the property--and increased by a like amount the gain on which you're liable for taxes.

This deferral is still a winner in two ways. First, you've gotten an interest-free loan from the tax collector. Second, the boomerang effect is mitigated. If you're in the top federal tax bracket of 35%, each dollar of depreciation will save you 35 cents in taxes. In contrast, recaptured real estate depreciation is taxed at only 25 cents on the dollar.

Pipeline partnership: You buy a $100,000 piece of, say, Enterprise Products Partners ( EPD - news - people ), a New York Stock Exchange-listed limited partnership that owns fuel pipelines, storage tanks and the like. Because the pipeline's cash profits are sheltered by a paper charge-off for depreciation, in the early years you get to treat most of your $5,500 annual dividend as a nontaxable "return of capital."

This shelter has a boomerang, too. When you sell Enterprise shares, whatever portion of your payouts escaped tax in the early years now gets recaptured. This recapture, unlike the one on real estate, is taxed at full ordinary-income rates.

No telling how energy-related partnerships will fare as investments. But the deferral makes them a winner on tax returns. The ordinary-income treatment of the dividends at the back end looks bad compared to the currently favorable 15% tax rate on dividends from ExxonMobil ( XOM - news - people ). But remember that Enterprise's shareholders escape the corporate income tax that Exxon's shareholders bear.

### PONDER BEFORE YOU LEAP

Say you've got $12,000 to put into your 401(k). Do you opt for the conventional version, which gives you a deduction on this year's taxes, or a Roth with its tax advantages years in the future? Taking the former route is a form of tax deferral but not necessarily a winner.

The Roth is of course a winner if your tax bracket is destined to be higher when you withdraw funds. Given the state of federal finances, rising rates are plausible. In contrast, the upfront deduction is the clear winner if, like many retirees, you expect your tax bracket to be lower when you withdraw the money.

What if you expect your tax bracket to remain the same?

Suppose your combined state and federal tax bracket is, and always will be, 33%. Also suppose that your original $12,000 investment will have doubled when it comes time to spend it.

With both the conventional and Roth accounts you end up with $24,000. But with the deductible 401(k), you'll have only $16,000 to spend after paying the back-end taxes.

The conventional 401(k) gives you a $12,000 deduction at the start, yielding $4,000 of investable cash. Even if you invest the $4,000 exactly the same way as your 401(k), however, it will grow to something less than $8,000 because it will get nicked every year for income taxes. Result: something less than $24,000 to spend in retirement. In this case the Roth wins.

### DON'T BE STUPID

You're putting $10,000 into the stock market. Captivated by the idea of making the IRS wait for its money, you buy a tax-deferred annuity. It runs up costs of 2% a year, what with expenses on the underlying fund, a mortality charge and various assessments.

If you had just bought the SPDR S&P 500 fund you would have been spending only 1% a year on income taxes and fund fees. So the annuity is already a loser.

It gets worse. When you cash out the annuity you discover that it has converted capital gains taxed at favorable rates into ordinary income taxed at high rates. It has, in other words, transformed gold into lead.