When talking about "tax-deferred" accounts, is that referring to income tax or something else?
I live in the US and I recently started my first investment into an IRA, specifically a Roth IRA since my income tax is so low right now, so I expected I'd put X money in, have a deduction for taxes, then have a slightly lower amount that would actually get invested. However, I got a bit blindsided when I put money into the account and the amount invested was the same as I put in, i.e. there was no deduction for taxes. Lets say I put $1000 in and my tax rate is 10%; I thought I'd only have $900 going into the investment, but I still have that full $1000. Since there wasn't any apparent tax taken out, I'm worried it will show up later when I don't expect it.
My understanding was Roth accounts require taxes paid when money is deposited and then offer tax-free growth and withdrawals, whereas Traditional accounts have tax-free deposits and taxes are deferred for when you withdraw. But with experiencing this, I realized I don't really know exactly what taxes retirement accounts concern themselves with.
Trying to reason through this myself, I'm thinking since my initial deposit was transferred manually from my bank account, i.e. with money from my paychecks which already have income-tax accounted for, technically my tax obligation on the investment was already met. Whereas if I set up a portion of my income to be deposited into my Roth IRA, I'd then first see a deduction on that and then the remaining amount would get invested.
Is that correct? Does "tax-deferred" refer to income tax or is there another tax I should be considering? Will this be something that's only accounted for when I file my taxes next year?
Apologies if this seems like a stupid question; when it comes to economics, I really have some kind of blindspot. I'm lucky to understand this particular passive-investment strategy at all.