HONEYWELL INTERNATIONAL INCHON
HONEYWELL INTERNATIONAL INC Income Taxes Disclosure
INCOME TAXES
INCOME BEFORE TAXES
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. | $ | 373 | $ | 1,442 | $ | 1,652 | |||||||||||
| Non-U.S. | 5,103 | 4,802 | 4,539 | ||||||||||||||
| Total Income before taxes | $ | 5,476 | $ | 6,244 | $ | 6,191 | |||||||||||
TAX EXPENSE
Tax expense consists of:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| U.S. Federal | $ | 49 | $ | 478 | $ | 13 | |||||||||||
| U.S. State | 27 | 57 | 22 | ||||||||||||||
| Non-U.S. | 914 | 943 | 1,038 | ||||||||||||||
| Total current tax expense | 990 | 1,478 | 1,073 | ||||||||||||||
| Deferred | |||||||||||||||||
| U.S. Federal | 10 | (209) | 58 | ||||||||||||||
| U.S. State | (54) | (23) | 17 | ||||||||||||||
| Non-U.S. | 62 | 3 | 114 | ||||||||||||||
Total deferred tax expense (benefit) | 18 | (229) | 189 | ||||||||||||||
Total Tax expense | $ | 1,008 | $ | 1,249 | $ | 1,262 | |||||||||||
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
| December 31, 2025 | ||||||||
| Amount | Percent | |||||||
| U.S. federal statutory income tax rate | 1,150 | 21.0 | ||||||
State and local income taxes, net of federal income tax effect1 | (45) | (0.8) | ||||||
| Foreign tax effects | ||||||||
| Puerto Rico | ||||||||
| Statutory tax rate difference between Puerto Rico and United States | 124 | 2.3 | ||||||
| Preferential tax rate | (252) | (4.6) | ||||||
| Other | 54 | 1.0 | ||||||
| Switzerland | ||||||||
| Statutory tax rate difference between Switzerland and United States | (278) | (5.1) | ||||||
| Subnational tax effects | 144 | 2.6 | ||||||
| Other | (23) | (0.4) | ||||||
| Other foreign jurisdictions | 265 | 4.9 | ||||||
| Effect of cross-border tax laws | ||||||||
| Global intangible low-taxed income | 153 | 2.8 | ||||||
| Other | (82) | (1.5) | ||||||
| Tax credits | ||||||||
| Research and development tax credits | (214) | (3.9) | ||||||
| Other | (3) | (0.1) | ||||||
| Changes in valuation allowance | 129 | 2.4 | ||||||
| Nontaxable or nondeductible items | ||||||||
| Impairment losses | 164 | 3.0 | ||||||
| Indemnification termination gain | (168) | (3.1) | ||||||
| Other | 4 | 0.1 | ||||||
| Changes in unrecognized tax benefits | (24) | (0.4) | ||||||
| Other adjustments | ||||||||
| Outside basis differences | (71) | (1.3) | ||||||
| Other | (19) | (0.5) | ||||||
| Effective income tax rate | $ | 1,008 | 18.4 | % | ||||
| 1 | State taxes in Arizona and Illinois made up the majority (greater than 50 percent) of the tax effect in this category. | |||||||
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
Taxes on non-U.S. earnings1,2,3 | (0.7) | (2.4) | |||||||||
U.S. state income taxes1 | 0.6 | 0.2 | |||||||||
| Reserves for tax contingencies | 1.6 | 3.9 | |||||||||
| Employee stock compensation | (0.7) | (0.3) | |||||||||
Restructuring4 | (0.3) | — | |||||||||
U.S. federal tax credits | (2.2) | (1.7) | |||||||||
U.S. valuation allowance4 | 1.0 | (0.1) | |||||||||
| All other items—net | (0.3) | (0.2) | |||||||||
| Effective income tax rate | 20.0 | % | 20.4 | % | |||||||
| 1 | Net of changes in valuation allowance. | |||||||
| 2 | Includes U.S. taxes on non-U.S. earnings, net of foreign tax credits. | |||||||
| 3 | 2023 includes (4.2)% deferred tax benefit resulting from a non-U.S. legislative change, offset by 4.2% deferred tax expense resulting from a full valuation allowance. | |||||||
| 4 | 2024 includes (1.0)% deferred tax benefit resulting from an outside basis difference in assets held for sale, offset by 1.0% deferred tax expense resulting from a full valuation allowance. | |||||||
The effective tax rate decreased by 1.6 percentage points in 2025 compared to 2024, largely driven by an increase in benefit for U.S. federal tax credits. The Company’s 2025 non-U.S. effective tax rate was 19.1%, a decrease of 0.6 percentage points compared to 2024. The decrease in the non-U.S. effective tax rate was primarily attributable to changes in accruals on foreign tax matters partially offset by other foreign discrete adjustments.
The effective tax rate decreased by 0.4 percentage points in 2024 compared to 2023. The decrease was primarily attributable to a reduced benefit from taxes on non-U.S. earnings, offset by a decrease in accruals on various foreign tax matters. The Company’s 2024 non-U.S. effective tax rate was 19.7%, a decrease of 5.6 percentage points compared to 2023. The decrease in the non-U.S. effective tax rate was primarily attributable to changes in accruals on foreign tax matters and other foreign discrete adjustments, partially offset by increased expense on global minimum taxes.
DEFERRED TAX ASSETS (LIABILITIES)
The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows:
| Deferred tax assets | December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
| Postretirement benefits other than pensions | $ | 45 | $ | 50 | |||||||
| Asbestos and environmental | 189 | 373 | |||||||||
| Capitalized research and development | 917 | 946 | |||||||||
| Employee compensation and benefits | 104 | 130 | |||||||||
| Lease liabilities | 212 | 228 | |||||||||
| Other accruals and reserves | 389 | 375 | |||||||||
| Net operating losses | 650 | 618 | |||||||||
| Capital loss carryover and outside basis differences | 544 | 467 | |||||||||
| Tax credit carryforwards and other attributes | 648 | 269 | |||||||||
| Gross deferred tax assets | 3,698 | 3,456 | |||||||||
| Valuation allowance | (1,374) | (1,253) | |||||||||
| Total deferred tax assets | 2,324 | 2,203 | |||||||||
| Deferred tax liabilities | |||||||||||
| Deferred revenue | (175) | (244) | |||||||||
| Pension | (1,339) | (1,481) | |||||||||
Property, plant and equipment | (351) | (212) | |||||||||
| Right-of-use asset | (198) | (198) | |||||||||
| Intangibles | (886) | (654) | |||||||||
| Unremitted earnings of foreign subsidiaries | (482) | (488) | |||||||||
| Other asset basis differences | (271) | (272) | |||||||||
| Total deferred tax liabilities | (3,702) | (3,549) | |||||||||
Net deferred tax liability1 | $ | (1,378) | $ | (1,346) | |||||||
| 1 | As of December 31, 2025, Net deferred tax liability excludes $136 million of deferred tax assets that are included in Assets held for sale in the Consolidated Balance Sheet. As of December 31, 2024, Net deferred tax liability excludes $124 million of deferred tax liabilities that are included in Liabilities held for sale in the Consolidated Balance Sheet. Refer to Note 2 Acquisitions, Divestitures, and Discontinued Operations. | |||||||
The Company's gross deferred tax assets include $1,258 million related to non-U.S. operations comprised primarily of net operating losses and other tax attribute carryforwards in Germany, Luxembourg, Switzerland, and the United Kingdom. The Company maintains a valuation allowance of $1,058 million against a portion of the non-U.S. gross deferred tax assets and a valuation allowance of $316 million against the U.S. gross deferred tax asset, primarily related to capital loss and other credit carryforwards. The change in the valuation allowance resulted in an increase of $88 million, a decrease of $13 million, and an increase of $458 million to income tax expense in 2025, 2024, and 2023, respectively. If the Company determines that the likelihood of realization of existing deferred tax assets changes, a corresponding increase or decrease to valuation allowances will be recognized as an increase or reduction to income tax expense in the period that determination is made.
As of December 31, 2025, the Company's net operating loss, capital loss, tax credit carryforwards, and other attributes were as follows:
| Jurisdiction | Net Operating and Capital Loss Carryforwards | Tax Credit Carryforwards and Other Attributes | ||||||||||||
| U.S. Federal | $ | 697 | $ | 72 | ||||||||||
| U.S. State | 267 | 21 | ||||||||||||
| Non-U.S. | 3,611 | 223 | ||||||||||||
Total | $ | 4,575 | $ | 316 | ||||||||||
Many jurisdictions impose limitations on the timing and utilization of net operating loss and tax credit carryforwards. Approximately $3,228 million of the non-U.S. net operating loss has no expiration period. The U.S. federal capital loss carryforward of $510 million expires in 2026. The remaining net operating loss, capital loss and credit carryforwards, and other tax attributes have expiration periods through 2045.
The table below summarizes the Company's change in unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Change in unrecognized tax benefits | |||||||||||||||||
| Balance at beginning of year | $ | 1,201 | $ | 1,215 | $ | 1,077 | |||||||||||
| Gross increases related to current period tax positions | 30 | 64 | 89 | ||||||||||||||
| Gross increases related to prior periods tax positions | 99 | 12 | 181 | ||||||||||||||
| Gross decreases related to prior periods tax positions | (2) | (17) | — | ||||||||||||||
| Decrease related to resolutions of audits with tax authorities | (91) | (31) | (132) | ||||||||||||||
| Expiration of the statute of limitations for the assessment of taxes | (44) | (9) | (3) | ||||||||||||||
| Foreign currency translation | 45 | (33) | 3 | ||||||||||||||
| Balance at end of year | $ | 1,238 | $ | 1,201 | $ | 1,215 | |||||||||||
As of December 31, 2025, 2024, and 2023, there were $1,238 million, $1,201 million, and $1,215 million, respectively, of unrecognized tax benefits that if recognized would be recorded as a component of tax expense.
The following table summarizes tax years that remain subject to examination by major tax jurisdictions as of December 31, 2025:
| Jurisdiction | Open Tax Years | |||||||
| Examination in progress | Examination not yet initiated | |||||||
| U.S. Federal | 2017-2021 | 2022-2025 | ||||||
| U.S. State | 2013-2024 | 2025 | ||||||
| Canada | 2018-2021 | 2022-2025 | ||||||
| China | 2013-2024 | 2025 | ||||||
Germany | 2017-2020 | 2021-2025 | ||||||
| India | 2006-2020 | 2021-2025 | ||||||
| Malaysia | 2019-2023 | 2024-2025 | ||||||
| Puerto Rico | N/A | 2020-2025 | ||||||
| Switzerland | N/A | 2020-2025 | ||||||
| United Kingdom | 2013-2023 | 2024-2025 | ||||||
Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in the Company's financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods.
Unrecognized tax benefits for examinations in progress were $874 million, $787 million, and $803 million as of December 31, 2025, 2024, and 2023, respectively. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax expense in the Consolidated Statement of Operations and totaled $55 million, $94 million, and $74 million for the years ended December 31, 2025, 2024, and 2023, respectively. Accrued interest and penalties were $751 million, $707 million, and $612 million as of December 31, 2025, 2024, and 2023, respectively.
The amounts of cash taxes paid by the Company for continuing and discontinued operations are as follows:
December 31, 2025 | |||||
| Federal | $ | 658 | |||
| State | 42 | ||||
| Foreign | |||||
| Canada | 105 | ||||
| China | 156 | ||||
| Switzerland | 224 | ||||
| All other foreign | 613 | ||||
| Income taxes paid, net of refunds | $ | 1,798 | |||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 10, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 9, 2018 | |
| 2016 | Feb 10, 2017 | |
| 2015 | Feb 12, 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.