CAPITAL ONE FINANCIAL CORPCOF
CAPITAL ONE FINANCIAL CORP Income Taxes Disclosure
NOTE 16—INCOME TAXES | ||
We recognize the current and deferred tax consequences of all transactions that have been recognized in the financial statements using the provisions of the enacted tax laws. Current income tax expense represents our estimated taxes to be paid or refunded for the current period and includes income tax expense related to our uncertain tax positions, as well as tax-related interest and penalties. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. We record valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. We record the effect of remeasuring deferred tax assets and liabilities due to a change in tax rates or laws as a component of income tax expense related to continuing operations for the period in which the change is enacted. We release income tax effects stranded in AOCI when an entire portfolio of the type of item is sold, terminated or extinguished. Income tax benefits are recognized when, based on their technical merits, they are more likely than not to be sustained upon examination. The amount recognized is the largest amount of benefit that is more likely than not to be realized upon settlement.
The following table presents significant components of the provision for income taxes attributable to continuing operations for the years ended December 31, 2025, 2024 and 2023.
Table 16.1: Significant Components of the Provision for Income Taxes Attributable to Continuing Operations
| Year Ended December 31, | ||||||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
Income (loss) from continuing operations before income tax expense (benefit) | ||||||||||||||||||||
US | $ | 1,918 | $ | 5,644 | $ | 5,815 | ||||||||||||||
International | 363 | 266 | 230 | |||||||||||||||||
Total income (loss) from continuing operations before income tax expense (benefit) | $ | 2,281 | $ | 5,910 | $ | 6,045 | ||||||||||||||
Income tax expense (benefit) from continuing operations | ||||||||||||||||||||
| Current income tax provision: | ||||||||||||||||||||
| Federal taxes | 1,483 | 1,598 | 1,423 | |||||||||||||||||
| State taxes | 527 | 395 | 382 | |||||||||||||||||
| International taxes | 90 | 23 | 76 | |||||||||||||||||
| Total current provision | 2,100 | 2,016 | 1,881 | |||||||||||||||||
| Deferred income tax provision (benefit): | ||||||||||||||||||||
| Federal taxes | (1,450) | (704) | (547) | |||||||||||||||||
| State taxes | (449) | (178) | (145) | |||||||||||||||||
| International taxes | (8) | 29 | (31) | |||||||||||||||||
| Total deferred provision (benefit) | (1,907) | (853) | (723) | |||||||||||||||||
Total income Tax provision (benefit) | ||||||||||||||||||||
Federal taxes | 33 | 894 | 876 | |||||||||||||||||
State taxes | 78 | 217 | 237 | |||||||||||||||||
International taxes | 82 | 52 | 45 | |||||||||||||||||
| Total income tax provision | $ | 193 | $ | 1,163 | $ | 1,158 | ||||||||||||||
Total income tax provision does not reflect the tax effects of items that are included in AOCI, which include a tax benefit of $1.2 billion in 2025, tax provision of $280 million in 2024, and a tax benefit of $455 million in 2023. See “Note 11—Stockholders’ Equity” for additional information.
The following table presents the reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate applicable to income from continuing operations for the years ended December 31, 2025, 2024 and 2023.
Table 16.2: Effective Income Tax Rate
| Year Ended December 31, | |||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||
Amount | Percentage | Amount | Percentage | Amount | Percentage | ||||||||||||||||||||||||
| Income tax at U.S. federal statutory tax rate | $ | 479 | 21.0 | % | $ | 1,241 | 21.0 | % | $ | 1,269 | 21.0 | % | |||||||||||||||||
Tax credits | |||||||||||||||||||||||||||||
Low Income Housing | (165) | (7.2) | (151) | (2.6) | (168) | (2.8) | |||||||||||||||||||||||
New Markets | (131) | (5.7) | (112) | (1.9) | (116) | (1.9) | |||||||||||||||||||||||
Other | (103) | (4.5) | (78) | (1.3) | (133) | (2.2) | |||||||||||||||||||||||
Nontaxable and nondeductible items | |||||||||||||||||||||||||||||
Nondeductible FDIC Premiums | 68 | 3.0 | 51 | 0.9 | 46 | 0.8 | |||||||||||||||||||||||
Other | 26 | 1.1 | (8) | (0.1) | (3) | (0.1) | |||||||||||||||||||||||
Cross-border taxes | (6) | (0.2) | 6 | 0.1 | 7 | 0.1 | |||||||||||||||||||||||
Changes in valuation allowance | 20 | 0.9 | 7 | 0.1 | 41 | 0.7 | |||||||||||||||||||||||
All other | (41) | (1.8) | (1) | 0.0 | 4 | 0.1 | |||||||||||||||||||||||
Domestic state and local taxes, net of federal effect(1) | 32 | 1.4 | 191 | 3.2 | 197 | 3.3 | |||||||||||||||||||||||
Foreign tax effects | 4 | 0.2 | 1 | 0.0 | 7 | 0.1 | |||||||||||||||||||||||
Worldwide changes in prior year unrecognized tax benefits | (12) | (0.6) | 35 | 0.6 | 8 | 0.1 | |||||||||||||||||||||||
Other | 22 | 0.9 | (19) | (0.3) | (1) | 0.0 | |||||||||||||||||||||||
| Effective income tax rate | $ | 193 | 8.5 | % | $ | 1,163 | 19.7 | % | $ | 1,158 | 19.2 | % | |||||||||||||||||
__________
(1) The jurisdictions that comprise the majority of the domestic state and local income taxes are California, Illinois, New Jersey, New York, New York City and Texas.
The following table presents significant components of our deferred tax assets and liabilities as of December 31, 2025 and 2024. The valuation allowance below represents the adjustment of our foreign tax credit carryforward, certain state deferred tax assets and net operating loss carryforwards to the amount we have determined is more likely than not to be realized.
Table 16.3: Significant Components of Deferred Tax Assets and Liabilities
| (Dollars in millions) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Allowance for credit losses | $ | 5,469 | $ | 3,730 | ||||||||||
Net unrealized loss on securities | 1,909 | 2,527 | ||||||||||||
| Rewards programs | 1,013 | 898 | ||||||||||||
Premises, equipment and software | 105 | 607 | ||||||||||||
| Net operating loss and tax credit carryforwards | 371 | 519 | ||||||||||||
| Net unrealized loss on derivatives | 128 | 505 | ||||||||||||
| Compensation and employee benefits | 646 | 479 | ||||||||||||
Lease Liabilities | 300 | 305 | ||||||||||||
Partnership Investments | 334 | 290 | ||||||||||||
| Other assets | 839 | 402 | ||||||||||||
| Subtotal | 11,114 | 10,262 | ||||||||||||
| Valuation allowance | (320) | (529) | ||||||||||||
| Total deferred tax assets | 10,794 | 9,733 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Right-of-use assets | 242 | 248 | ||||||||||||
| Partnership investments | 173 | 133 | ||||||||||||
| Goodwill and intangibles | $ | 4,264 | 116 | |||||||||||
| Mortgage servicing rights | 69 | 76 | ||||||||||||
| Loan Fees & Expenses | 63 | 48 | ||||||||||||
| Other liabilities | 43 | 60 | ||||||||||||
| Total deferred tax liabilities | 4,854 | 681 | ||||||||||||
| Net deferred tax assets | $ | 5,940 | $ | 9,052 | ||||||||||
Our gross federal net operating loss carryforwards were not material as of both December 31, 2025 and 2024. The net tax values of our state net operating loss and interest deduction carryforwards were $125 million and $301 million as of December 31, 2025 and 2024, respectively, and they will expire from 2026 to 2045. Our foreign tax credit carryforwards were $239 million and $214 million as of December 31, 2025 and 2024, respectively, and they will expire from 2029 to 2036.
Our valuation allowance decreased by $209 million to $320 million as of December 31, 2025 compared to $529 million as of December 31, 2024. Of the total decrease, $182 million is related to a revaluation of our state attributes related to the Transaction.
The following table presents the accrued balance of tax, interest and penalties related to unrecognized tax benefits.
Table 16.4: Reconciliation of the Change in Unrecognized Tax Benefits
| (Dollars in millions) | Gross Unrecognized Tax Benefits | Accrued Interest and Penalties | Gross Tax, Interest and Penalties | |||||||||||||||||
Balance as of January 1, 2023 | $ | 41 | $ | 10 | $ | 51 | ||||||||||||||
| Additions for tax positions related to the current year | 2 | 0 | 2 | |||||||||||||||||
| Additions for tax positions related to prior years | 10 | 4 | 14 | |||||||||||||||||
| Reductions for tax positions related to prior years due to IRS and other settlements | (20) | (7) | (27) | |||||||||||||||||
Balance as of December 31, 2023 | 33 | 7 | 40 | |||||||||||||||||
| Additions for tax positions related to the current year | 12 | 0 | 12 | |||||||||||||||||
| Additions for tax positions related to prior years | 28 | 5 | 33 | |||||||||||||||||
| Reductions for tax positions related to prior years due to IRS and other settlements | (8) | (1) | (9) | |||||||||||||||||
Balance as of December 31, 2024 | 65 | 11 | 76 | |||||||||||||||||
| Additions for tax positions related to the current year | 12 | 12 | 24 | |||||||||||||||||
| Additions for tax positions related to prior years | 63 | 7 | 70 | |||||||||||||||||
| Reductions for tax positions related to prior years due to IRS and other settlements | (11) | (3) | (14) | |||||||||||||||||
| Other reductions for tax positions related to prior years | $ | (10) | $ | (4) | $ | (14) | ||||||||||||||
Balance as of December 31, 2025 | $ | 119 | $ | 23 | $ | 142 | ||||||||||||||
Portion of balance at December 31, 2025 that, if recognized, would impact the effective income tax rate | $ | 107 | $ | 18 | $ | 125 | ||||||||||||||
We are subject to examination by the IRS and other tax authorities in certain countries and states in which we operate. The tax years subject to examination vary by jurisdiction. During 2025, the Company continued to participate in the IRS Compliance Assurance Process (“CAP”). Capital One has been accepted into CAP for 2026. During 2025, the IRS completed its review of the Company’s Federal income tax returns for 2021 through 2024, with no material adjustments. As a result of Capital One’s merger with Discover, the IRS will also review Discover’s final 2025 short-period return through the CAP audit. We expect that the IRS review of Discover’s 2025 short period return and Capital One’s 2025 Federal income tax return will be substantially completed in 2026.
We intend to permanently reinvest the undistributed earnings of our foreign subsidiaries. Therefore, no deferred tax liability has been provided on these earnings.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 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.