T Stamp IncIDAI
T Stamp Inc Income Taxes Disclosure
Income Taxes
Net loss before taxes consisted of the following:
| For the years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| U.S. | $ | (6,054,099) | $ | (7,289,854) | ||||||||||||||||
| Non-U.S. | (2,257,225) | (3,307,494) | ||||||||||||||||||
| Net loss before taxes and equity method investment | $ | (8,311,324) | $ | (10,597,348) | ||||||||||||||||
The components of income tax benefit (expense) are as follows:
| For the years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Current: | ||||||||||||||||||||
| U.S. Federal | $ | (405) | $ | 4,606 | ||||||||||||||||
| U.S. State | 5,375 | 3,200 | ||||||||||||||||||
| Non-U.S. | 8,805 | — | ||||||||||||||||||
| 13,775 | 7,806 | |||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| U.S. Federal | — | — | ||||||||||||||||||
| U.S. State | — | — | ||||||||||||||||||
| Non-U.S. | — | — | ||||||||||||||||||
| — | — | |||||||||||||||||||
| Total income tax benefit (expense) | $ | 13,775 | $ | 7,806 | ||||||||||||||||
A reconciliation of the U.S. statutory rate to the effective income tax rate on a continuing basis is as follows for the year ended December 31, 2025, in accordance with ASU 2023-09 which was adopted prospectively:
| Fiscal Year 2025 | |||||||||||||||||
| Tax Impact | Rate Impact | ||||||||||||||||
| US Federal Statutory Rate | $ | (1,745,378) | 21.00 | % | |||||||||||||
| Domestic Federal | |||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||
| Stock Compensation | 52,163 | (0.63) | % | ||||||||||||||
| Other | 5,224 | (0.07) | % | ||||||||||||||
| Tax Credits | |||||||||||||||||
| Research and Development Tax Credits | (158,666) | 1.91 | % | ||||||||||||||
| Changes in Federal Valuation Allowance | 1,395,315 | (16.79) | % | ||||||||||||||
State Taxes, net of federal income tax effect (1) | 5,159 | (0.06) | % | ||||||||||||||
| Foreign Tax Effects | |||||||||||||||||
| Malta | |||||||||||||||||
| Statutory Tax Rate Difference Between Malta and the US | (278,513) | 3.35 | % | ||||||||||||||
| Nondeductible Losses | 696,283 | (8.38) | % | ||||||||||||||
| Other Foreign Jurisdictions | |||||||||||||||||
| Effect of Rates Different than Statutory | 5,927 | (0.07) | % | ||||||||||||||
| Foreign Net Operating Loss - PTR | 1,136 | (0.01) | % | ||||||||||||||
| Changes in Foreign Valuation Allowance | 35,125 | (0.42) | % | ||||||||||||||
| $ | 13,775 | (0.17) | % | ||||||||||||||
(1) State taxes in New York make up the majority (greater than 50%) of the Company's state income tax expense.
A reconciliation of the U.S. statutory rate to the effective income tax rate on a continuing basis prior to the adoption of ASU 2023-09 is as follows for the years ended December 31:
| For the year ended December 31, 2024 | |||||||||||
| Expected tax provision (benefit) at U.S. federal statutory rate | $ | (2,232,547) | |||||||||
| State income taxes, net of federal benefit | 11,169 | ||||||||||
| Foreign tax rate differential | (401,831) | ||||||||||
| Foreign nondeductible expenses | 1,012,744 | ||||||||||
| Foreign deferred only adjustment | 3,870,611 | ||||||||||
| Change in valuation allowance | (2,339,502) | ||||||||||
| Change in deferred rate impact | (153,018) | ||||||||||
| Prior year deferred tax adjustments | (16,246) | ||||||||||
| Stock compensation | 78,998 | ||||||||||
| Credits | (196,077) | ||||||||||
| Warrants | 75,350 | ||||||||||
| Loss On Investments | 244,966 | ||||||||||
| Other | 53,189 | ||||||||||
| Total provision (benefit) for income taxes | $ | 7,806 | |||||||||
Temporary differences that give rise to significant portions of the deferred tax assets are as follows:
| As of December 31, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Deferred Tax Assets: | ||||||||||||||||||||
| Net operating losses | $ | 6,260,311 | $ | 4,341,271 | ||||||||||||||||
| Section 174 | 485,700 | 1,285,511 | ||||||||||||||||||
| Tax credits | 852,202 | 718,107 | ||||||||||||||||||
| Equity compensation | 1,760,059 | 1,594,665 | ||||||||||||||||||
| Lease liability | 2,979 | 9,787 | ||||||||||||||||||
| Loss on investment | 951,052 | 958,208 | ||||||||||||||||||
| Other - accruals | 16,109 | 5,468 | ||||||||||||||||||
| Other | 17,546 | 36,441 | ||||||||||||||||||
| Total Deferred Tax Assets | 10,345,958 | 8,949,458 | ||||||||||||||||||
| Deferred Tax Liabilities: | ||||||||||||||||||||
| Capitalized internal-use software, net | (20,420) | (45,892) | ||||||||||||||||||
| Right-of-use asset | (3,026) | (10,117) | ||||||||||||||||||
| Total Deferred Tax Liabilities | (23,446) | (56,009) | ||||||||||||||||||
| Net Deferred Tax Assets | 10,322,512 | 8,893,449 | ||||||||||||||||||
| Valuation allowance | (10,322,512) | (8,893,449) | ||||||||||||||||||
| Deferred Tax Assets, Net | $ | — | $ | — | ||||||||||||||||
Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including the Company’s past and anticipated future performance, the reversal of deferred tax liabilities, the length of carry-back and carry-forward periods, and the implementation of tax planning strategies.
Objective positive evidence is necessary to support a conclusion that a valuation allowance is not needed for all or a portion of deferred tax assets when significant negative evidence exists. The Company’s cumulative losses in recent years are the most compelling form of negative evidence considered by management in making this determination. For the years ended December 31, 2025 and 2024, the net increase in the total valuation allowance for 2025 was $1,429,063 and the decrease for 2024 was $2,339,502, and management has determined that based on all available evidence, a valuation allowance of $10,322,512 and $8,893,449 is appropriate at December 31, 2025 and 2024, respectively.
At December 31, 2025, the Company had Federal net operating loss carrying forwards of $25,601,610, which have an indefinite life. At December 31, 2025, the Company had state net operating loss carry forwards of $4,718,777. State net operating losses generated for years ending December 31, 2017 total $574,051 and will expire in 2037. Net operating losses generated beginning in 2018 total $4,144,726 and have an indefinite life. At December 31, 2025, the Company had foreign net operating loss carry forwards of $2,475,354 with an indefinite carry forward period.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
| For the years ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||
| Unrecognized tax benefit/(Expenses) — January 1 | $ | 179,778 | $ | 129,082 | ||||||||||||||||
| Gross increases — tax positions in current period | — | — | ||||||||||||||||||
| Gross increases — tax positions in prior period | 40,111 | 50,696 | ||||||||||||||||||
| Gross decreases — tax positions in current period | — | — | ||||||||||||||||||
| Gross decreases — tax positions in prior period | — | — | ||||||||||||||||||
| Gross decreases — settlements with taxing authorities | — | — | ||||||||||||||||||
| Gross decreases — lapse of statute of limitations | — | — | ||||||||||||||||||
| Unrecognized tax benefits/(Expenses) — December 31 | $ | 219,889 | $ | 179,778 | ||||||||||||||||
Included in the balance of unrecognized tax benefit as of December 31, 2025 and December 31, 2024, are $219,899 and $179,778 respectively, of tax benefits that, if recognized, would affect the effective tax rate.
The Company recognizes accrued interest related to unrecognized tax expenses and penalties as income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued $0 of interest during 2025, and $0 of penalty, and in total, as of December 31, 2025 has recognized $0 of interest and penalty.
The Company is subject to taxation in the US and various state jurisdictions. As of December 31, 2025 the Company’s tax returns for 2022, 2023 and 2024 are subject to full examination by the tax authorities. As of December 31, 2025, the Company is generally no longer subject to state or local examinations by tax authorities for years before 2022, except to the extent of NOLs generated in prior years claimed on a tax return.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 30, 2023 | |
| 2021 | Apr 7, 2022 | |
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.