CVS HEALTH CorpCVS
CVS HEALTH Corp Income Taxes Disclosure
Income Taxes
The components of income before income tax provision, based on tax jurisdiction, consisted of the following for the years ended December 31, 2025, 2024 and 2023:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Income before income tax provision: | |||||||||||||||||
| United States | $ | 1,335 | $ | 5,964 | $ | 11,107 | |||||||||||
| Foreign | 801 | 184 | 66 | ||||||||||||||
| Total | $ | 2,136 | $ | 6,148 | $ | 11,173 | |||||||||||
The income tax provision (benefit) consisted of the following for the years ended December 31, 2025, 2024 and 2023:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (217) | $ | 1,622 | $ | 2,814 | |||||||||||
| State | 409 | 476 | 662 | ||||||||||||||
| Foreign | 114 | 36 | 5 | ||||||||||||||
| Total current | 306 | 2,134 | 3,481 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 92 | (456) | (543) | ||||||||||||||
| State | 10 | (119) | (139) | ||||||||||||||
| Foreign | — | 3 | 6 | ||||||||||||||
| Total deferred | 102 | (572) | (676) | ||||||||||||||
| Total income tax provision (benefit): | |||||||||||||||||
| Federal | (125) | 1,166 | 2,271 | ||||||||||||||
| State | 419 | 357 | 523 | ||||||||||||||
| Foreign | 114 | 39 | 11 | ||||||||||||||
| Total | $ | 408 | $ | 1,562 | $ | 2,805 | |||||||||||
The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2025, 2024 and 2023:
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| In millions, except percentages | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||
| Federal statutory tax rate | $ | 449 | 21.0 | % | $ | 1,291 | 21.0 | % | $ | 2,346 | 21.0 | % | ||||||||||||||||||||||||||
| State and local income taxes, net of federal income tax effect | 340 | 15.9 | 302 | 4.9 | 435 | 3.9 | ||||||||||||||||||||||||||||||||
| Foreign tax effects: | ||||||||||||||||||||||||||||||||||||||
| Ireland | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between Ireland and United States | (66) | (3.1) | — | — | * | — | — | |||||||||||||||||||||||||||||||
| Other | 19 | 0.9 | — | — | * | — | — | |||||||||||||||||||||||||||||||
| Total foreign tax effects | (47) | (2.2) | (15) | (0.2) | 7 | 0.1 | ||||||||||||||||||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||
| Effect of cross-border tax laws: | ||||||||||||||||||||||||||||||||||||||
| Global intangible low-taxed income | 38 | 1.7 | — | — | * | — | — | |||||||||||||||||||||||||||||||
| Foreign base company income | 27 | 1.3 | — | — | * | — | — | |||||||||||||||||||||||||||||||
| Total effect of cross-border tax laws | 65 | 3.0 | 20 | 0.3 | — | — | ||||||||||||||||||||||||||||||||
| Tax credits: | ||||||||||||||||||||||||||||||||||||||
| Research and development tax credits | (50) | (2.3) | — | — | * | — | — | * | ||||||||||||||||||||||||||||||
| Energy related tax credits | (76) | (3.6) | — | — | * | — | — | |||||||||||||||||||||||||||||||
| Low-income housing tax credits | (25) | (1.2) | — | — | * | — | — | * | ||||||||||||||||||||||||||||||
| Other | (16) | (0.7) | — | — | * | — | — | * | ||||||||||||||||||||||||||||||
| Total tax credits | (167) | (7.8) | (92) | (1.5) | (62) | (0.6) | ||||||||||||||||||||||||||||||||
| Changes in valuation allowances | (7) | (0.3) | 57 | 0.9 | 28 | 0.2 | ||||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||||||||||||||
| Recognition of basis difference in subsidiaries | (1,793) | (83.9) | (71) | (1.2) | — | — | ||||||||||||||||||||||||||||||||
| Gain on deconsolidation | (101) | (4.7) | — | — | — | — | ||||||||||||||||||||||||||||||||
| Goodwill impairment | 1,202 | 56.3 | — | — | — | — | ||||||||||||||||||||||||||||||||
| Nondeductible litigation | 324 | 15.2 | — | — | * | — | — | * | ||||||||||||||||||||||||||||||
| Compensation | 72 | 3.3 | — | — | * | — | — | * | ||||||||||||||||||||||||||||||
| Other | 7 | 0.3 | 99 | 1.7 | 65 | 0.6 | ||||||||||||||||||||||||||||||||
| Total nontaxable or nondeductible items | (289) | (13.5) | 28 | 0.5 | 65 | 0.6 | ||||||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 64 | 3.0 | (29) | (0.5) | (14) | (0.1) | ||||||||||||||||||||||||||||||||
| Effective income tax rate | $ | 408 | 19.1 | % | $ | 1,562 | 25.4 | % | $ | 2,805 | 25.1 | % | ||||||||||||||||||||||||||
_____________________________________________
*The impact to the income tax rate is immaterial for separate disclosure in the respective period.
Following the voluntarily initiation of Chapter 11 proceedings under the U.S. Bankruptcy Code described in “Subsidiary Bankruptcy” within Note 1 ‘‘Significant Accounting Policies’’, it was determined that the Company’s investment in a subsidiary became worthless in 2025. Consequently, the Company recognized a related net tax benefit of approximately $1.9 billion in the aggregate during the year ended December 31, 2025.
For the year ended December 31, 2025, state and local income taxes in New York, California, Florida, New Jersey and Pennsylvania comprise the majority of the state and local income taxes, net of federal income tax effect category. For the years ended December 31, 2024 and 2023, state and local income taxes in New York, California, Florida and Illinois comprise the majority of the state and local income taxes, net of federal income tax effect category.
Income taxes paid, net of refunds received consisted of the following for the years ended December 31, 2025, 2024 and 2023:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Income taxes paid, net of refunds received: | |||||||||||||||||
| Federal | $ | 1,583 | $ | 1,194 | $ | 2,797 | |||||||||||
| State | 457 | 484 | 725 | ||||||||||||||
| Foreign | 126 | 25 | 2 | ||||||||||||||
| Total | $ | 2,166 | $ | 1,703 | $ | 3,524 | |||||||||||
The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31, 2025 and 2024:
| In millions | 2025 | 2024 | |||||||||
| Deferred income tax assets: | |||||||||||
| Lease and rents | $ | 4,435 | $ | 4,763 | |||||||
| Legal charges | 1,011 | 1,109 | |||||||||
| Inventory | 70 | 68 | |||||||||
| Employee benefits | 171 | 168 | |||||||||
| Bad debts and other allowances | 682 | 593 | |||||||||
| Net operating loss and other carryovers | 793 | 272 | |||||||||
| Deferred income | 35 | 47 | |||||||||
| Insurance reserves | 360 | 381 | |||||||||
| Investments | — | 21 | |||||||||
| Other | 456 | 486 | |||||||||
| Valuation allowance | (487) | (301) | |||||||||
Total deferred income tax assets | 7,526 | 7,607 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Investments | 134 | — | |||||||||
| Retirement benefits | 190 | 172 | |||||||||
| Lease and rents | 3,872 | 4,125 | |||||||||
| Depreciation and amortization | 7,162 | 7,116 | |||||||||
| Total deferred income tax liabilities | 11,358 | 11,413 | |||||||||
| Net deferred income tax liabilities | $ | 3,832 | $ | 3,806 | |||||||
When evaluating the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the Company’s recent operating results. The Company established a valuation allowance of $487 million and $301 million as of December 31, 2025 and 2024, respectively, because it does not consider it more likely than not that certain deferred tax assets will be recovered.
As of December 31, 2025, the Company had net operating loss and other carryovers of $793 million, a portion of which has an indefinite carryforward period, while the remainder expires between 2026 and 2046.
A reconciliation of the beginning and ending balance of unrecognized tax benefits in 2025, 2024 and 2023 is as follows:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Beginning balance | $ | 424 | $ | 436 | $ | 446 | |||||||||||
| Additions based on tax positions related to the current year | — | — | 2 | ||||||||||||||
| Additions based on tax positions related to prior years | 106 | 67 | 46 | ||||||||||||||
| Reductions for tax positions of prior years | — | (49) | (24) | ||||||||||||||
| Expiration of statutes of limitation | (40) | (29) | (34) | ||||||||||||||
| Settlements | (66) | (1) | — | ||||||||||||||
| Ending balance | $ | 424 | $ | 424 | $ | 436 | |||||||||||
CVS Health Corporation and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The IRS has completed its examinations of the Company’s consolidated U.S. federal income tax returns for tax years through 2016, 2018 and 2019. The IRS has substantially completed its examination of the Company’s consolidated U.S. federal income tax return for tax year 2017.
CVS Health Corporation and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2025, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s operating results, financial condition or liquidity.
Substantially all material state and local income tax matters have been concluded for fiscal years through 2018. Certain state exams are likely to be concluded and certain state statutes of limitations will lapse in 2026, but the change in the balance of the Company’s uncertain tax positions is projected to be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for certain previous years. An estimate of the range of the possible change cannot be made at this time.
The Company records interest expense related to unrecognized tax benefits and penalties in the income tax provision. The Company accrued interest expense of approximately $42 million, $45 million and $31 million in 2025, 2024 and 2023, respectively. The Company had approximately $175 million and $165 million accrued for interest and penalties as of December 31, 2025 and 2024, respectively.
As of December 31, 2025, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate is approximately $325 million, after considering the federal benefit of state income taxes.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 10, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 7, 2024 | |
| 2022 | Feb 8, 2023 | |
| 2021 | Feb 9, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 14, 2018 | |
| 2016 | Feb 9, 2017 | |
| 2015 | Feb 9, 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.