Hour Loop, Inc Income Taxes Disclosure

NOTE 12 - Income Tax

 

The components of income taxes expense are as follows:

 Schedule of Effective Income Tax Rate Reconciliation

		December 31, 2025				December 31, 2024
Federal rate			21.00	%			21.00	%
Blended state tax rate			4.12	%			4.12	%
Blended statutory tax rate			25.12	%			25.12	%

 

Schedule of Effective Tax Rate Reconciliation

Effective Tax Rate Reconciliation for the Year Ended December 31, 2025
						%				$
Pretax Book Income			2,397,585				21.00	%			503,493
Permanent Differences			37,324				0.33	%			7,838
PY Federal Perm True-up			110,378				0.97	%			23,179
State income tax			137,590				7.87	%			188,752
Other Deferred adjustment			-				-1.27	%			(30,526	)
Total Tax Expenses							28.89	%			692,736

 

Effective Tax Rate Reconciliation for the Year Ended December 31, 2024
						%				$
Pretax Book Income			959,561				21.00	%			201,508
Permanent Differences			84,240				1.84	%			17,690
PY Federal Perm True-up			117,653				2.57	%			24,707
State income tax			68,981				6.79	%			65,198
Other Deferred adjustment			-				-0.73	%			(6,989	)
Total Tax Expenses							31.47	%			302,114

 

 

Schedule of Tax Expense Summary 

		Current				Deferred				Total
		Income Tax				Income Tax				Income Tax
Tax Expense Summary, for the Year Ended December 31, 2025		Expense				Expense				Expense
Federal		$	86,863				388,227				475,090
State			137,590				80,056				217,646
Total tax expense		$	224,453				468,283				692,736

 

		Current				Deferred				Total
		Income Tax				Income Tax				Income Tax
Tax Expense Summary, for the Year Ended December 31, 2024		Expense				Expense				Expense
Federal			39,989				193,145				233,134
State			18,013				50,967				68,980
Total Tax Expense			58,002				244,112				302,114

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets as of December 31, 2025 and 2024 were as follows:

 

Schedule of Deferred Tax Assets and Liabilities

		Deferred Tax Assets				Deferred Tax Assets
Deferred Tax Assets summary		December 31, 2025				December 31, 2024
Federal		$	520,464			$	908,691
State			71,357				151,413
Foreign (non-U.S.)			18,143				-
Total		$	609,964			$	1,060,104

 

		Deferred Tax Assets				Deferred Tax Assets
Deferred Tax Assets summary		December 31, 2025				December 31, 2024
Operating lease right of use lease assets		$	1,574			$	787
Inventories allowance			112,518				140,743
Net loss carry forward			495,872				918,574
Total		$	609,964			$	1,060,104

 

The Company files income tax return in the U.S. federal jurisdiction and various state jurisdictions. Based on management’s evaluation, there is no provision necessary for material uncertain tax position for the Company as of December 31, 2025 and 2024.

 

For the years ended December 31, 2025 and 2024, the Company reported net operating income of $1,704,849 and $657,447, respectively. The net operating loss carryforward is not subject to any expiration period under federal regulations, while at the state level, the expiration period usually ranges up to 20 years, or there may be no expiration period at all.

 

The Company expects to generate sufficient taxable income in future periods against which the deferred tax assets can be utilized. Accordingly, a valuation allowance may not be needed.