CSX CORPCSX
CSX CORP Income Taxes Disclosure
Income Taxes
Earnings before income taxes of $3.8 billion, $4.6 billion and $4.8 billion for the years ended 2025, 2024 and 2023, respectively, nearly all of which represents earnings from domestic operations. The breakdown of income tax expense between current and deferred is as follows:
| Years Ended | |||||||||||||||||
| (Dollars in Millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 553 | $ | 873 | $ | 851 | |||||||||||
| State | 133 | 200 | 184 | ||||||||||||||
| Subtotal Current | $ | 686 | $ | 1,073 | $ | 1,035 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | 195 | 26 | 110 | ||||||||||||||
| State | (1) | (14) | 16 | ||||||||||||||
| Subtotal Deferred | $ | 194 | $ | 12 | $ | 126 | |||||||||||
| Total Income Tax Expense | $ | 880 | $ | 1,085 | $ | 1,161 | |||||||||||
The Company recorded a 2025 income tax benefit of $43 million primarily as a result of a change in the valuation of the state deferred tax liability as a result of filing the 2024 tax returns, other state tax planning, and a tax credit purchase benefit. In 2024, the Company recorded an income tax benefit of $31 million primarily as a result of state legislative changes and a change in the valuation of the state deferred tax liability as a result of filing the 2023 tax returns. In 2023, the Company recorded an income tax benefit of $22 million primarily from a change in the valuation of the state deferred tax liability.
NOTE 12. Income Taxes, continued
2025 Income Tax Expense Reconciliation and Cash Payments
The tables in this section present information on income tax expenses and payments for 2025. Prior period values are not presented, as these disclosure requirements have been implemented on a prospective basis. The principal factors contributing to the difference between the effective income tax rate and the U.S. statutory federal income tax rate are as follows:
| (Dollars in Millions) | 2025 | ||||||||||
| Amount | Percentage | ||||||||||
| $ | 792 | 21.0 | % | ||||||||
State and Local Income Taxes, Net of Federal Tax Effect (a) | 102 | 2.7 | |||||||||
| Foreign Tax Effects | 3 | 0.1 | |||||||||
| Tax Credits | (17) | (0.5) | |||||||||
| Nontaxable or Nondeductible Items | (24) | (0.6) | |||||||||
| Other Adjustments | 24 | 0.6 | |||||||||
| Effective Income Tax Rate | $ | 880 | 23.3 | % | |||||||
(a) The states that contribute to the majority (greater than 50% combined) of the tax effect in this category include Indiana, Virginia, Pennsylvania, Florida, and Alabama, listed in descending order of tax effect.
The amount of cash taxes paid by the Company are shown in the table below. Payments in 2025 include $429 million of previously postponed federal and state taxes related to the 2024 tax year, with no postponements available for 2025. There were no individual jurisdictions with cash taxes paid that equaled or exceeded 5% of income taxes paid in 2025.
(Dollars in Millions) | 2025 | ||||
Federal (a) | $ | 938 | |||
| State | 161 | ||||
| Foreign | 3 | ||||
| Total | $ | 1,102 | |||
(a) Federal cash tax payments include tax credits purchased of $200 million.
Income Tax Expense Reconciliation for Comparative Periods
Income tax expense reconciled to the tax computed at statutory rates for comparative periods, which are not subject to the requirements of ASU 2023-09, is presented in the following table.
| Years Ended | |||||||||||||||||||||||
(Dollars in Millions) | 2024 | 2023 | |||||||||||||||||||||
| Federal Income Taxes | $ | 957 | 21.0 | % | $ | 1,014 | 21.0 | % | |||||||||||||||
| State Income Taxes | 147 | 3.2 | % | 158 | 3.3 | % | |||||||||||||||||
| Other | (19) | (0.4) | % | (11) | (0.2) | % | |||||||||||||||||
| Income Tax Expense/ Rate | $ | 1,085 | 23.8 | % | $ | 1,161 | 24.1 | % | |||||||||||||||
NOTE 12. Income Taxes, continued
Balance Sheet and Other Information
The primary factors in the change in year-end net deferred income tax liability balances include the annual provision for deferred income tax expense and accumulated other comprehensive income (loss). The significant components of deferred income tax assets and liabilities include:
| 2025 | 2024 | ||||||||||||||||||||||
| (Dollars in Millions) | Assets | Liabilities | Assets | Liabilities | |||||||||||||||||||
| Accelerated Depreciation | $ | — | $ | 7,835 | $ | — | $ | 7,651 | |||||||||||||||
| Other | 560 | 639 | 568 | 642 | |||||||||||||||||||
| Total | $ | 560 | $ | 8,474 | $ | 568 | $ | 8,293 | |||||||||||||||
| Net Deferred Income Tax Liabilities | $ | 7,914 | $ | 7,725 | |||||||||||||||||||
The Company files a consolidated federal income tax return, which includes its principal domestic subsidiaries. CSX and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. CSX participated in a contemporaneous IRS audit of tax years 2025, 2024 and 2023. Federal examinations of original federal income tax returns for all years through 2023 are resolved.
As of December 2025 and 2024, the Company had approximately $21 million and $20 million, respectively, of total unrecognized tax benefits as a result of uncertain tax positions. Net tax benefits of $16 million and $16 million as of December 2025 and 2024, respectively, could favorably impact the effective income tax rate in each year. The Company does not expect that unrecognized tax benefits as of December 2025 for various state and federal income tax matters will significantly change over the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. There were no material changes to the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the years ended 2025, 2024, or 2023.
CSX’s continuing practice is to recognize net interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were not material as of December 2025 or 2024. Additionally, expenses from changes to the reserves for interest and penalties were not material in 2025, 2024, or 2023.
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.