Caring Brands, Inc. Income Taxes Disclosure
Note 13 – Income Taxes
We record tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of certain tax uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the recognized tax benefit liabilities. These differences, if any, will be reflected as increases or decreases to income tax expense in the period in which new information becomes available.
As of December 31, 2025 and December 31, 2024, the Company has not recorded any uncertain tax positions in the accompanying financial statements.
The effective U.S. federal corporate income tax rate for the years ended December 31, 2025 and 2024 was 21%.
As of December 31, 2025, the Company had net operating loss carryforwards of approximately $7,141,162, compared to $862,971 as of December 31, 2024. These net operating losses may be carried forward indefinitely; however, their utilization may be subject to limitations under Section 382 of the Internal Revenue Code due to ownership changes and stock issuances.
The significant components of the Company’s deferred tax assets were as follows:
| December 31, 2025 | December 31, 2024 | |||||||
| Deferred Tax Asset | $ | 1,499,644 | $ | 181,186 | ||||
| Valuation Allowance | (1,499,644 | ) | (181,186 | ) | ||||
| Net Deferred Tax Asset | $ | $ | ||||||
As of December 31, 2025, the Company recorded a deferred tax asset of $1,499,644 primarily related to federal net operating loss carryforwards. Due to the Company’s cumulative losses and the lack of sufficient positive evidence to support realization, management determined that it is more likely than not that the deferred tax asset will not be realized. Accordingly, a full valuation allowance of $1,499,644 has been recorded as of December 31, 2025.
As of December 31, 2024, the Company recorded a full valuation allowance of $181,186 against its deferred tax assets.
The Company recorded no provision for income taxes for the years ended December 31, 2025 and 2024 due to operating losses and the establishment of a full valuation allowance against its deferred tax assets.
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.