American Airlines Group Inc.AAL
American Airlines Group Inc. Income Taxes Disclosure
Income Taxes
The significant components of the income tax provision were (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Deferred income tax provision: | |||||||||||||||||
| Federal | $ | 183 | $ | 391 | $ | 361 | |||||||||||
| State and local | 14 | 35 | 33 | ||||||||||||||
| Deferred income tax provision | 197 | 426 | 394 | ||||||||||||||
| Total income tax provision | $ | 197 | $ | 426 | $ | 394 | |||||||||||
The income tax provision differed from amounts computed at the U.S. federal statutory income tax rate as follows (amounts in millions):
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | Amount | Rate | ||||||||||||||||||||||||||||||
| U.S. federal statutory income tax rate | $ | 160 | 21.0 | % | $ | 355 | 21.0 | % | $ | 332 | 21.0 | % | |||||||||||||||||||||||
| Domestic federal: | |||||||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Nondeductible meals and other nondeductible employee benefits | 23 | 3.0 | % | 18 | 1.1 | % | 19 | 1.2 | % | ||||||||||||||||||||||||||
| Nondeductible officer compensation | 10 | 1.3 | % | 12 | 0.7 | % | 11 | 0.6 | % | ||||||||||||||||||||||||||
| Other nontaxable and nondeductible items | (4) | (0.4) | % | 12 | 0.7 | % | 4 | 0.3 | % | ||||||||||||||||||||||||||
| Other | (6) | (0.8) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Domestic state and local income taxes, net of federal effect | 14 | 1.8 | % | 29 | 1.7 | % | 28 | 1.8 | % | ||||||||||||||||||||||||||
| Effective tax rate | $ | 197 | 25.9 | % | $ | 426 | 25.2 | % | $ | 394 | 24.9 | % | |||||||||||||||||||||||
The components of American’s deferred tax assets and liabilities were (in millions):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and other carryforwards | $ | 3,566 | $ | 3,891 | |||||||
| Loyalty program liability | 1,949 | 1,799 | |||||||||
| Leases | 1,553 | 1,582 | |||||||||
| Pension benefits | 104 | 228 | |||||||||
| Postretirement benefits other than pension benefits | 260 | 270 | |||||||||
| Rent expense | 37 | 59 | |||||||||
| Other | 633 | 726 | |||||||||
| Total deferred tax assets | 8,102 | 8,555 | |||||||||
| Valuation allowance | (12) | (12) | |||||||||
| Net deferred tax assets | 8,090 | 8,543 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Accelerated depreciation and amortization | (4,520) | (4,599) | |||||||||
| Leases | (1,582) | (1,642) | |||||||||
| Other | (165) | (244) | |||||||||
| Total deferred tax liabilities | (6,267) | (6,485) | |||||||||
| Net deferred tax asset | $ | 1,823 | $ | 2,058 | |||||||
At December 31, 2025, American had approximately $11.7 billion of gross federal NOLs and $3.8 billion of other carryforwards available to reduce future federal taxable income, of which $1.8 billion will expire beginning in 2033 if unused and $13.7 billion can be carried forward indefinitely. American is a member of AAG’s consolidated federal and certain state income tax returns. American also had approximately $4.7 billion of NOL carryforwards to reduce future state taxable income at December 31, 2025, which will expire in taxable years 2025 through 2045 if unused.
American’s ability to use its NOLs and other carryforwards depends on the amount of taxable income generated in future periods. American provides a valuation allowance for its deferred tax assets, which include its NOLs and other carryforwards, when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. American considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets. Many factors are considered that impact American’s assessment of future profitability, including conditions which are beyond its control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. American has determined that positive factors outweigh negative factors in the determination of the realizability of its deferred tax assets.
In 2025, American recorded an income tax provision of $197 million with an effective rate of approximately 25.9%, which was substantially non-cash. Substantially all of American’s income before income taxes is attributable to the United States.
American files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. American’s 2022 through 2024 tax years are still subject to examination by the Internal Revenue Service. Various state, local and foreign jurisdiction tax years remain open to examination, and American is under examination, in administrative appeals or engaged in tax litigation in certain jurisdictions. American believes that the effect of any assessments will not be material to its consolidated financial statements.
The amount of, and changes to, American’s uncertain tax positions were not material in any of the years presented. American accrues interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 17, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 24, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.