Better Home & Finance Holding CoBETR
Better Home & Finance Holding Co Income Taxes Disclosure
19. Income Taxes
The Company adopted ASU 2023‑09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, as of January 1, 2025, prospectively. The amendments enhance the transparency of income tax disclosures and did not have a material impact on the Company’s financial statements.
The Company is subject to US (federal, state and local) and foreign income taxes. The components of income (loss) before income tax expense (benefit) are as follows:
| Year Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| U.S. | $ | (132,816) | $ | (163,597) | |||||||
| Foreign | (33,003) | (41,843) | |||||||||
| (Loss) income before income tax expense | $ | (165,819) | $ | (205,440) | |||||||
The following table displays the components of the Company’s federal, state and local, and foreign income taxes.
| Year Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Current Income Tax Expense (Benefit): | |||||||||||
| Federal | $ | 117 | $ | 121 | |||||||
| Foreign | (25) | 349 | |||||||||
| State and local | — | 376 | |||||||||
| Total Current Income Tax Expense (Benefit) | 92 | 846 | |||||||||
| Deferred Income Tax Expense (Benefit): | |||||||||||
| Federal | (23,237) | (25,971) | |||||||||
| Foreign | (6,430) | (7,756) | |||||||||
| State and local | (8,860) | (2,475) | |||||||||
| Valuation Allowance | 38,488 | 36,206 | |||||||||
| Total Deferred Income Tax Expense (Benefit) | (39) | 4 | |||||||||
| Income Tax Expense (Benefit) | $ | 53 | $ | 850 | |||||||
Total income tax provision does not reflect the tax effects of items that are included in APIC, which include a tax expense of $741 thousand in 2025.
The following table displays the difference between the U.S. federal statutory corporate tax rate and the effective tax rate, prepared under the updated guidance:
| December 31, 2025 | |||||||||||
| Amount | Percentage | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | (34,822) | 21.00 | % | |||||||
| State and local Income Taxes, net of Federal Income Tax Effect | — | — | % | ||||||||
| Foreign Tax Effects | |||||||||||
| United Kingdom | |||||||||||
| Changes in Valuation Allowances | 6,391 | -3.85 | % | ||||||||
| Other | 428 | -0.26 | % | ||||||||
| Other foreign jurisdictions | 49 | -0.03 | % | ||||||||
| Tax Credits | |||||||||||
| Research and Development tax credits | (2,792) | 1.68 | % | ||||||||
| Change in Valuation Allowances | 27,134 | -16.36 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| 162(m) - executive compensation | 2,454 | -1.48 | % | ||||||||
| Other | 1,094 | -0.66 | % | ||||||||
| Changes in Unrecognized tax benefits | 117 | -0.07 | % | ||||||||
| Effective Tax Rate | $ | 53 | -0.03 | % | |||||||
The difference between the U.S. Federal statutory tax rate and the effective tax rate relates primarily to the change in valuation allowance.
The following table displays the difference between the U.S. federal statutory corporate tax rate and the effective tax rate, prepared under the prior guidance:
| December 31, 2024 | |||||
| US federal statutory corporate tax rate | 21.00 | % | |||
| State and local tax | 0.61 | % | |||
| Stock-based compensation | -3.27 | % | |||
| Fair value of warrants | 0.09 | % | |||
| Others | -2.33 | % | |||
| Foreign tax rate differential | 0.81 | % | |||
| R&D tax credit | 0.09 | % | |||
| Unrecognized tax benefits | -0.06 | % | |||
| Change in valuation allowance | -17.35 | % | |||
| Effective Tax Rate | -0.41 | % | |||
Deferred Income Tax Assets and Liabilities
The Company evaluates the deferred income tax assets for the recoverability using a consistent approach which considers the relative impact of negative and positive evidence, including the Company’s historical profitability and losses and projections of future taxable income (loss).
As of December 31, 2025, the Company continued to conclude that the negative evidence with respect to the recoverability of its deferred income tax assets outweighed the positive evidence. It is more likely than not that the deferred income tax assets will not be realized. As of December 31, 2025 and 2024, the Company had a 100% valuation allowance
on its domestic deferred tax assets. The Company’s framework for assessing the recoverability of deferred income tax assets requires it to weigh all available evidence, to the extent it exists, including:
•the sustainability of future profitability required to realize the deferred income tax assets,
•the cumulative net income or losses in the consolidated statements of operations and comprehensive income in recent years
The following table displays deferred income tax assets and deferred income tax liabilities:
| As of December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
| Deferred Income Tax Assets | |||||||||||
| Net operating loss | $ | 351,027 | $ | 372,712 | |||||||
| Reserves | 5,172 | 5,110 | |||||||||
| Loan repurchase reserve | 1,256 | 1,969 | |||||||||
| Restructuring reserve | 2,716 | 2,376 | |||||||||
| Accruals | 84 | 174 | |||||||||
| Internal use software | — | 12,221 | |||||||||
| Other | 396 | 587 | |||||||||
| Total Deferred Income Tax Assets | 360,651 | 395,149 | |||||||||
| Deferred Income Tax Liabilities | |||||||||||
| Non-qualified stock options | (9,378) | (10,182) | |||||||||
| Intangible assets | (2,162) | (467) | |||||||||
| Depreciation | (3,525) | (939) | |||||||||
| Internal use software | (3,705) | — | |||||||||
| Total Deferred Income Tax Liabilities | (18,770) | (11,588) | |||||||||
| Net Deferred Tax Asset before Valuation Allowance | 341,881 | 383,561 | |||||||||
| Less: Valuation Allowance | (341,645) | (383,362) | |||||||||
| Deferred Income Tax Assets, Net | $ | 236 | $ | 199 | |||||||
As of December 31, 2025 and 2024 the Company had federal net operating loss (“NOL”) carryforwards of approximately $1,276 million and $1,285 million, respectively, and state NOL carryforwards of $1,014 million and $1,017 million, respectively, which are available to offset future taxable income. As of December 31, 2025 and 2024 the Company had foreign (U.K.) NOL carryforwards of approximately $106 million and $189 million, respectively, which are available to offset future taxable income and do not expire. Certain state NOLs as of December 31, 2025 will begin to expire in 2035.
Utilization of the NOL carryforwards for purposes of federal income tax is subject to an annual limitation pursuant to Internal Revenue Code Section 382 (“Section 382”) due to ownership changes that have occurred. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has assessed and concluded there have been multiple changes of control as defined by Section 382 since inception. As of December 31, 2025, the Company's deferred income tax asset relating to the Company's NOL carryforwards will be subject to an annual limitation pursuant to Section 382, thereby limiting the amount of NOL utilization each year.
The income tax paid, net of refunds received for the year ended December 31, 2025 is as follows:
| Year Ended December 31, | |||||
| (Amounts in thousands) | 2025 | ||||
| U.S. federal | $ | 2,315 | |||
| U.S. state and local | |||||
| California | 1,357 | ||||
| Colorado | (797) | ||||
| Georgia | (870) | ||||
| Indiana | (110) | ||||
| Other | (78) | ||||
| Foreign | |||||
| India | 411 | ||||
| UK | (521) | ||||
| Total Income Tax Paid (net of refunds received) | $ | 1,707 | |||
A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:
| Year Ended December 31, | |||||||||||
| (Amounts in thousands) | 2025 | 2024 | |||||||||
Unrecognized tax benefits - January 1 | $ | 1,353 | $ | 1,353 | |||||||
| Gross increases - tax positions in prior period | — | — | |||||||||
| Gross decreases - tax positions in prior period | — | — | |||||||||
| Gross increases - tax positions in current period | 48 | — | |||||||||
| Settlement | — | — | |||||||||
| Lapse of statute of limitations | — | — | |||||||||
| Unrecognized tax benefits - December 31 | $ | 1,401 | $ | 1,353 | |||||||
As of December 31, 2025 and 2024, there were $1.4 million and $1.35 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate.
During 2025, the gross unrecognized tax benefits increased by $48 thousand and $117 thousand of interest and penalties were accrued on the $1.4 million unrecognized tax benefit balance. Included in the balance of unrecognized tax benefits of $1.4 million as of December 31, 2025, are tax benefits that if recognized, will affect the effective tax rate.
The Company files a consolidated federal income tax return, foreign income tax returns and various state consolidated or combined income tax returns. The Company’s major tax jurisdictions are U.S. federal, New York State, New York City, California, and New Jersey.
The Company is generally no longer subject to U.S. federal income tax examination for any year prior to 2021, to state or local income tax examinations for any year prior to 2021, or to foreign examinations for any year prior to 2021 for India and for any year prior to 2024 for U.K. Nonetheless, NOLs generated in prior years are subject to examination and potential adjustment by the taxing authorities upon their utilization in subsequent years’ tax returns.
The Pillar Two rules are intended to ensure that large multinational enterprise ("MNE") groups pay a minimum level of tax on the income arising in each of the jurisdictions in which they operate. The rules do so by imposing a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the 15 percent minimum rate. The Pillar Two rules include:
•“[A]n Income Inclusion Rule (IIR), which imposes top-up tax on a parent entity in respect of the low taxed income of a constituent entity.”
•“[A]n Undertaxed Payment Rule (UTPR), which denies deductions or requires an equivalent adjustment to the extent the low tax income of a constituent entity is not subject to tax under an IIR.”
Management believes that the Company does not meet the requirements of a MNE and therefore the Pillar Two rules would not have a material future financial effect on the Company.
On July 4, 2025, “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14,” commonly referred to as “One Big Beautiful Bill Act” (the “Act”) was signed into law. The centerpiece of the Act is the extension of expiring, and in some cases expired, provisions of the 2017 Tax Cuts and Jobs Act (2017 TCJA). The Act adjusted a number of provisions affecting businesses that were set to sunset, phase-out, or phase-in that would have taken effect in the absence of action by Congress, or that had already taken effect. There were no material consequences to the Company as a result of this legislation.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 13, 2026 | Showing above |
| 2024 | Mar 19, 2025 | |
| 2023 | Apr 8, 2024 | |
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.