Ally Financial Inc.ALLY

Ally Financial Inc. Income Taxes Disclosure

10-KFiled Feb 25, 20267 min read
Income Taxes
The significant components of income tax expense from continuing operations were as follows.
Year ended December 31, ($ in millions)
202520242023
Income from continuing operations before income tax expense
Domestic$1,031 $817 $1,086 
Foreign20 19 17 
Total income from continuing operations1,051 836 1,103 
Current income tax expense
U.S. federal226 107 85 
Foreign6 6 5 
State and local135 26 36 
Total current expense367 139 126 
Deferred income tax (benefit) expense
U.S. federal(47)53 26 
Foreign— 1 (1)
State and local(121)(26)(7)
Total deferred (benefit) expense(168)28 18 
Total income tax expense from continuing operations$199 $167 $144 
A reconciliation of income tax expense from continuing operations with the amounts at the statutory U.S. federal income tax rate is shown in the following table.
202520242023
Year ended December 31, ($ in millions)
AmountPercentAmountPercentAmountPercent
Statutory U.S. federal tax expense$221 21 %$175 21 %$232 21 %
Domestic federal reconciling items
Nontaxable or nondeductible items
Nondeductible FDIC premium expenses32 3 34 4 33 3 
Goodwill impairment15 1 5 1 — — 
Other (a)6 1 4 1 3 — 
Tax credits
Low-income housing tax credits (b)(55)(5)(40)(5)(37)(3)
Research and development credits(36)(3)(3)— (5)— 
Foreign tax credits (c)11 1 (1)— 367 33 
Other(1)— — — (7)(1)
Changes in valuation allowances (d)(13)(1)(14)(2)(476)(43)
Effects of cross-border tax laws3 — 4 — 4 — 
State & local income taxes, net of federal income tax benefit (e)14 1 16 2 31 3 
Foreign tax effects
Canada2 — 3 — 1 — 
Changes in unrecognized tax benefits— — (16)(2)(2)— 
Total income tax expense from continuing operations$199 19 %$167 20 %$144 13 %
(a)Includes tax effects of share-based payment awards.
(b)Includes investment amortization. Refer to Note 1 for additional information on the accounting for investments in tax credit structures using the proportional amortization method.
(c)Includes tax expense associated with the expiration of unused foreign tax credits.
(d)Includes tax benefits related to the reduction of valuation allowance associated with the expiration of unused foreign tax credits.
(e)For the year ended December 31, 2025, state taxes in New York and Florida made up the majority of the tax effect in this category, compared to state taxes in New York, Florida, and Texas, and state taxes in Florida, Maryland and Georgia, for the years ended December 31, 2024, and 2023, respectively.
For the years ended December 31, 2025, and 2024, consolidated income tax expense from continuing operations was largely driven by pretax earnings and nondeductible FDIC premium expenses, partially offset by an income tax benefit related to various tax credits. For the year ended December 31, 2023, consolidated income tax expense from continuing operations was largely driven by pretax earnings, partially offset by the release of the valuation allowance on foreign tax credit carryforwards as well as an income tax benefit related to various tax credits. The release of the valuation allowance was primarily driven by the identification and execution of a tax planning strategy allowing for additional utilization of foreign tax credits.
We record rehabilitation, energy, and clean vehicle tax credits as part of our ITC category. Our ITCs are generally accounted for using the deferral method and recognized as a reduction of the corresponding asset value. However, ITCs that qualify for proportional amortization treatment are accounted for using the flow-through method and are recognized as a reduction to current income tax expense.
The significant components of deferred tax assets and liabilities are reflected in the following table.
December 31, ($ in millions)
20252024
Deferred tax assets
Adjustments to securities and hedging transactions (a)$820 $1,080 
Tax credit carryforwards690 679 
Adjustments to loan value751 420 
State and local taxes352 301 
Fixed assets272 257 
Internally generated intangible assets168 107 
Other332 347 
Gross deferred tax assets3,385 3,191 
Valuation allowance(122)(138)
Deferred tax assets, net of valuation allowance3,263 3,053 
Deferred tax liabilities
Lease transactions434 653 
Deferred acquisition costs374 380 
Long-term debt58 62 
Other71 52 
Gross deferred tax liabilities937 1,147 
Net deferred tax assets (b)$2,326 $1,906 
(a)Securities include deferred tax assets related to available-for-sale securities, held-to-maturity securities, and equity securities. There were $613 million and $882 million of deferred tax assets related to available-for-sale securities, at December 31, 2025, and 2024, respectively.
(b)Amounts include $2.3 billion and $1.9 billion of net deferred tax assets included in other assets on our Consolidated Balance Sheet for tax jurisdictions in a total net deferred tax asset position at December 31, 2025, and 2024, respectively, and $8 million and $10 million included in accrued expenses and other liabilities on our Consolidated Balance Sheet for tax jurisdictions in a total net deferred tax liability position at December 31, 2025, and 2024, respectively.
As of each reporting date, we consider existing evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. We continue to believe it is more likely than not that the benefit for certain foreign tax credit carryforwards and state net operating loss carryforwards will not be realized. In recognition of this risk, we continue to provide a partial valuation allowance on the deferred tax assets relating to these carryforwards, and it is reasonably possible that the valuation allowance may change in the next 12 months.
The following table summarizes net deferred tax assets including related valuation allowances at December 31, 2025.
($ in millions)Deferred tax assetValuation allowanceNet deferred tax assetYears of expiration
Tax credit carryforwards
General business credits$664 $— $664 2044 - 2045
Foreign tax credits26 (13)13 2027 - 2035
Total tax credit carryforwards690 (13)677 
Tax loss carryforwards
Net operating losses — state110 (109)1 2026 - Indefinite
Net operating losses — federal6 — 6 2028 - Indefinite
Total U.S. federal and state tax loss carryforwards116 (109)7 
Other net deferred tax assets1,642 — 1,642 n/a
Net deferred tax assets$2,448 $(122)$2,326 
n/a = not applicable
As of December 31, 2025, we have recognized insignificant deferred tax liabilities for incremental U.S. federal taxes that stem from temporary differences related to investment in foreign subsidiaries or corporate joint ventures as there is no assertion of indefinite reinvestment outside of the United States.
The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits.
($ in millions)202520242023
Balance at January 1,$77 $91 $46 
Increases related to positions taken during the current year91 — — 
Increases related to positions taken during prior years1 6 48 
Decreases related to positions taken during prior years— (20)(2)
Settlements(1)— (1)
Expiration of statute of limitations— — — 
Balance at December 31,$168 $77 $91 
Included in the unrecognized tax benefits balances are some items, the recognition of which would not affect the effective tax rate, such as the tax effect of certain temporary differences and the portion of gross state unrecognized tax benefits that would be offset by the tax benefit of the associated U.S. federal deduction. The balance of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $152 million, $64 million, and $75 million for the years ended December 31, 2025, 2024, and 2023, respectively.
We recognize accrued interest and penalties related to uncertain income tax positions in interest expense and other operating expenses, respectively. As of December 31, 2025, the cumulative accrued balance for interest and penalties was $11 million, and interest and penalties of $4 million were accrued during the year ended December 31, 2025. As of December 31, 2024, the cumulative accrued balance for interest and penalties was $7 million, and penalties of $1 million were accrued during the year ended December 31, 2024. As of December 31, 2023, the cumulative accrued balance for interest and penalties was $6 million, and interest and penalties of $3 million were accrued during the year ended December 31, 2023.
We file tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. Our most significant operations are in the United States and Canada. The oldest tax years that remain subject to examination for those jurisdictions are 2019 and 2011, respectively.
The following table provides a disaggregation of the amount of cash paid for income taxes, net of refunds.
Year ended December 31, ($ in millions)
202520242023
U.S. federal $220 $107 $(65)
U.S. state and local
Florida22 *8 
California18 **
Other92 16 32 
Foreign
Canada*12 *
Other7 — (2)
Total income taxes paid (net of refunds)$359 $135 $(27)
* = jurisdiction below the disaggregation threshold for the period presented and not separately disclosed.

Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Feb 19, 2025
2023Feb 20, 2024
2022Feb 24, 2023
2021Feb 25, 2022
2020Feb 24, 2021
2019Feb 25, 2020
2018Feb 20, 2019
2017Feb 21, 2018

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.

Other Available Disclosures

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