Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Corporation pays taxes in U.S. and Non-U.S. jurisdictions based on income. The table below presents income before income tax expense disaggregated by U.S. and Non-U.S. jurisdictions for 2025, 2024 and 2023.
Income Before Income Tax Expense
December 31
(Dollars in millions) 2025 2024 2023
U.S. $ 28,813  $ 24,251  $ 23,978 
Non-U.S. (1)
8,882  8,972  8,552 
Income before income tax expense $ 37,695  $ 33,223  $ 32,530 
(1) Income is related to the tax jurisdiction of the legal entity’s principal place of business.
The components of income tax expense for 2025, 2024 and 2023 are presented in the table below.
Income Tax Expense
(Dollars in millions) 2025 2024 2023
Current income tax expense      
U.S. federal $ 4,202  $ 4,709  $ 4,760 
U.S. state and local 442  603  559 
Non-U.S.  2,247  2,065  1,918 
Total current expense 6,891  7,377  7,237 
Deferred income tax expense (benefit)
  
U.S. federal (114) (1,679) (1,233)
U.S. state and local 239  153  (62)
Non-U.S.  170  399  283 
Total deferred expense (benefit)
 295  (1,127) (1,012)
Total income tax expense $ 7,186  $ 6,250  $ 6,225 
Total income tax expense does not reflect the tax effects of items that are included in OCI each period. For more information, see Note 14 – Accumulated Other Comprehensive Income (Loss)). Other tax effects included in OCI each period resulted in an expense of $1.0 billion, $1.5 billion and $892 million in 2025, 2024 and 2023, respectively.
Income tax expense for 2025, 2024 and 2023 varied from the amount computed by applying the statutory income tax rate to income before income taxes. The Corporation’s federal statutory tax rate was 21 percent for 2025, 2024 and 2023. A reconciliation of the expected U.S. federal income tax expense, calculated by applying the federal statutory tax rate, to the Corporation’s actual income tax expense, and the effective tax rates for 2025, 2024 and 2023 are presented in the following table.
Reconciliation of Income Tax Expense
  Amount Percent Amount Percent Amount Percent
(Dollars in millions) 2025 2024 2023
Expected U.S. federal income tax expense $ 7,916  21.0  % $ 6,976  21.0  % $ 6,831  21.0  %
Increase (decrease) in taxes resulting from:
State and local income tax, net of federal income tax deduction 726  2.0  690  2.1  331  1.0 
Tax credits
PTCs and LIHTCs accounted for under PAM (633) (1.7) (587) (1.8) (600) (1.8)
ITCs and other PTCs (705) (1.9) (924) (2.8) (568) (1.7)
Other (216) (0.6) (307) (0.9) (227) (0.7)
Nontaxable or nondeductible items
Tax-exempt income, including dividends (405) (1.1) (477) (1.4) (411) (1.3)
Nondeductible expenses 419  1.1  426  1.2  405  1.2 
Other (215) (0.6) (15) —  (24) (0.1)
Changes in unrecognized tax benefits (187) (0.5) (99) (0.3) (26) (0.1)
Foreign tax effects 550  1.5  586  1.7  381  1.2 
Effect of cross-border tax laws (205) (0.5) (175) (0.5) (83) (0.3)
Changes in valuation allowances 149  0.4  224  0.7  303  0.9 
Other (8) —  (68) (0.2) (87) (0.2)
Total income tax expense (benefit) $ 7,186  19.1  % $ 6,250  18.8  % $ 6,225  19.1  %
Tax credits originate from investments in affordable housing and renewable energy partnerships and similar entities. Increases in tax credits recognized in 2025 and 2024, compared to 2023, were primarily driven by the Corporation’s growth in the volume of investments in wind and solar renewable energy production facilities. For more information, see Note 6 – Securitizations and Other Variable Interest Entities.
The majority (greater than 50 percent) of the state and local income taxes, net of federal income tax deduction, in the respective periods above were attributable to New York City, New York State and California in 2025; California, New York State and New York City in 2024; and New York State and New York City in 2023.
The reconciliation of the beginning unrecognized tax benefits (UTB) balance to the ending balance is presented in the table below.
Reconciliation of the Change in Unrecognized Tax Benefits
(Dollars in millions) 2025 2024 2023
Balance, January 1 $ 684  $ 811  $ 1,056 
Increases related to positions taken during the current year
 54  55  76 
Increases related to positions taken during prior years (1)
24  39  139 
Decreases related to positions taken during prior years (1)
(214) (134) (32)
Settlements (46) (62) (380)
Expiration of statute of limitations (19) (25) (48)
Balance, December 31 $ 483  $ 684  $ 811 
(1)    The sum of the positions taken during prior years differs from the $(187) million, $(99) million and $(26) million in the Reconciliation of Income Tax Expense table due to temporary items, state items and jurisdictional offsets, as well as the inclusion of interest in the Reconciliation of Income Tax Expense table.
At December 31, 2025, 2024 and 2023, the balance of the Corporation’s UTBs which would, if recognized, affect the Corporation’s effective tax rate was $415 million, $573 million and $671 million, respectively. Included in the UTB balance are some items the recognition of which would not affect the effective tax rate, such as the tax effect of certain temporary differences, the portion of gross state UTBs that would be offset by the tax benefit of the associated federal deduction and the portion of gross non-U.S. UTBs that would be offset by tax reductions in other jurisdictions.
The Corporation recognized an interest benefit of $26 million in 2025, interest benefit of $9 million in 2024 and interest expense of $35 million in 2023. At 2025 and 2024, the Corporation’s accrual for interest and penalties that related to income taxes, net of taxes and remittances, was $72 million and $105 million.
The Corporation files income tax returns in more than 60 states and municipalities and more than 40 non-U.S. jurisdictions each year. The IRS and other tax authorities in countries and states in which the Corporation has significant business operations examine tax returns periodically (continuously in some jurisdictions). The table below summarizes the status of examinations by major jurisdiction for the Corporation and various subsidiaries at December 31, 2025.
Tax Examination Status
Years under
Examination (1)
Status at
December 31, 2025
United States 2017-2023 Field Examination
California 2018-2021 Field Examination
New York 2022-2024 Field Examination
New York City 2022-2024 To begin in 2026
United Kingdom (2)
2021-2023 Field Examination
(1)    All tax years subsequent to the years shown remain subject to examination.
(2) Field examination for tax year 2024 to begin in 2026.
Significant components of the Corporation’s net deferred tax assets and liabilities at December 31, 2025 and 2024 are presented in the following table.
Deferred Tax Assets and Liabilities
  December 31
(Dollars in millions) 2025 2024
Deferred tax assets    
Tax attribute carryforwards $ 12,875  11,898 
Allowance for credit losses 3,415  3,463 
Lease liability 2,025  2,169 
Employee compensation and retirement benefits 1,807  1,760 
Accrued expenses 1,030  1,379 
Security, loan and debt valuations 559  2,680 
Other 2,469  2,339 
Gross deferred tax assets 24,180  25,688 
Valuation allowance (2,310) (2,361)
Total deferred tax assets, net of valuation
   allowance		 21,870  23,327 
 
Deferred tax liabilities
Equipment lease financing 3,246  3,021 
Right-of-use asset 1,873  2,025 
Other 1,747  1,920 
Gross deferred tax liabilities 6,866  6,966 
Net deferred tax assets $ 15,004  16,361 
The table below summarizes the deferred tax assets and related valuation allowances recognized for the net operating loss (NOL) and tax credit carryforwards at December 31, 2025.
Net Operating Loss and Tax Credit Carryforward Deferred Tax Assets
(Dollars in millions) Deferred
Tax Asset		 Valuation
Allowance		 Net
Deferred
Tax Asset		 First Year
Expiring
Net operating losses - U.K. (1)
$ 7,447  $ —  $ 7,447  None
Net operating losses - other non-U.S. 
 67  (25) 42  Various
Net operating losses - U.S. states (2)
389  (242) 147  Various
General business credits 3,920  —  3,920  After 2045
Foreign tax credits 1,052  (1,052) —  After 2028
(1)Represents U.K. broker-dealer net operating losses that may be carried forward indefinitely.
(2)The net operating losses and related valuation allowances for U.S. states before considering the benefit of federal deductions were $492 million and $307 million.
Management concluded that no valuation allowance was necessary to reduce the deferred tax assets related to the U.K. NOL carryforwards and U.S. federal and certain state NOL carryforwards since estimated future taxable income will be sufficient to utilize these assets prior to their expiration. Additionally, the Corporation’s U.K. net deferred tax assets consist primarily of NOLs that are expected to be realized in a U.K. subsidiary over an extended number of years. Management’s conclusion is supported by financial results, profit forecasts for the relevant entity and the indefinite period to carry forward NOLs. However, a material change in those estimates could lead management to reassess such valuation allowance conclusions.
At December 31, 2025, the Corporation did not record U.S. federal income taxes on temporary differences related to certain investments in non‑U.S. subsidiaries because these investments are considered to be permanently reinvested. If a deferred tax liability had been recognized, the amount would be approximately $1.0 billion.
The following table summarizes cash taxes paid, net of refunds received, for jurisdictions that represented five percent or more of total income taxes paid, net of refunds received.
Income Taxes Paid
(Dollars in millions) 2025 2024 2023
Taxes paid by jurisdiction
U.S. federal
 $ 1,050  $ 1,143  $ 775 
U.S. state and local
California (1)
not required not required 230 
Other 651  569  525 
   Total U.S. state and local
 651  569  755 
Non-U.S.
United Kingdom 433  578  519 
India 272  292  266 
Other 1,524  1,240  1,090 
   Total Non-U.S.
 2,229  2,110  1,875 
   Total income taxes paid
 $ 3,930  $ 3,822  $ 3,405 
(1)Amounts are not required as the total for the periods presented is less than five percent of the total income taxes paid.