13. Income Taxes

The 2025 loss from continuing operations before income tax benefit from U.S. operations is $111 million.

Reconciliations of the statutory U.S. federal income tax rates to our effective tax rate for continuing operations follow:


	Years Ended December 31,
	2024			2023
Statutory federal rate		21.0	%		21.0	%
Non-deductible goodwill impairment		4.2			—
Non-deductible regulatory-related expenses		2.4			—
Recognition of deferred tax asset on government services business basis difference		(5.3	)		—
State tax, net of federal income tax effect		4.2			5.5
Other, net		(1.5	)		.6
Effective tax rate		25.0	%		27.1	%


	Year Ended December 31, 2025
(Dollars in millions)	Amount			Percent
Statutory federal rate	$	(23	)		21.0	%
Federal
Tax credits
Energy-related tax credits		(2	)		1.6
Other		(1	)		.5
Nontaxable or nondeductible items
Executive compensation		2			(1.6	)
Market value adjustments on life insurance contracts		(2	)		2.1
Other		—			(.2	)
Other adjustments		(1	)		.8
State income taxes, net of federal income tax effect (1)		(6	)		5.6
Changes in unrecognized tax benefits		2			(1.7	)
Total tax (benefit) / expense and effective rate	$	(31	)		28.1	%

(1)

In 2025, state taxes in Virginia, California and Delaware comprise the majority of the state income taxes, net of federal income tax effect category.

13. Income Taxes (Continued)

Income tax expense (benefit) consists of:


	December 31,
(Dollars in millions)	2025			2024		2023
Current provision/(benefit):
Federal	$	(28	)	$	29	$	63
State		(5	)		8		24
Total current provision/(benefit)		(33	)		37		87

Deferred provision/(benefit):
Federal		2			5		—
State		—			1		(2	)
Total deferred provision/(benefit)		2			6		(2	)

Total provision/(benefit):
Federal		(26	)		34		63
State		(5	)		9		22
Provision for income tax expense/(benefit)	$	(31	)	$	43	$	85

Income taxes paid (net of refunds received) consists of:


(Dollars in millions)	Year Ended December 31, 2025
Federal	$	18
State		1
Income taxes paid (net of refunds received)	$	19

13. Income Taxes (Continued)

The tax effect of temporary differences that give rise to deferred tax assets and liabilities include the following:


	December 31,
(Dollars in millions)	2025		2024
Deferred tax assets:
Loan reserves	$	164	$	181
Accrued expenses not currently deductible		18		22
Education loan premiums and discounts, net		40		40
Government services business held for sale		—		18
Operating loss and credit carryovers		84		9
Stock-based compensation plans		7		7
Acquired intangible assets		—		9
Other		14		16
Total deferred tax assets		327		302
Deferred tax liabilities:
Market value adjustments on education loans, investments and derivatives		115		100
Original issue discount on borrowings		14		13
Acquired intangible assets		9		—
Other		2		5
Total deferred tax liabilities		140		118
Net deferred tax assets	$	187	$	184

Included in operating loss and credit carryovers is a valuation allowance of $151 million and $123 million as of December 31, 2025 and 2024, respectively, against a portion of the Company’s state deferred tax assets. The valuation allowance is primarily attributable to deferred tax assets for state net operating loss carryovers and state IRC § 163(j) disallowed interest expense carryovers that management believes it is more likely than not will expire prior to being realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income of the appropriate character (i.e., capital or ordinary) during the period in which the temporary differences become deductible. Factors generally considered by management include (but are not limited to): any changes in economic conditions, the scheduled reversals of deferred tax liabilities, and the history of positive taxable income in evaluating the realizability of the deferred tax assets.

The operating loss and credit carryovers consist of:


	December 31, 2025
(Dollars in millions)	Gross		Tax-Effected		Expiration	Corresponding Valuation Allowance(1)		Operating Loss and Credit Carryovers
Federal operating loss carryovers	$	318	$	66	Begins in 2032	$	—	$	66
Federal capital loss carryovers		63		13	Begins in 2030		—		13
State capital loss carryovers		63		3	Begins in 2030		1		2
State operating loss carryovers		990		55	Begins in 2026		52		3
State IRC § 163(j) disallowed interest expense carryovers		6,824		98	Indefinite		98		—
			$	235		$	151	$	84

(1)

The valuation allowance attributable to deferred tax assets for state net operating loss carryovers, and state IRC § 163(j) disallowed interest expense carryovers, are amounts that management believes more likely than not will expire prior to being realized.

13. Income Taxes (Continued)

Accounting for Uncertainty in Income Taxes

The following table summarizes changes in unrecognized tax benefits:


	December 31,
(Dollars in millions)	2025			2024			2023
Unrecognized tax benefits at beginning of year	$	47.1		$	48.5		$	50.7
Increases resulting from tax positions taken during a prior period		—			8.8			3.8
Decreases resulting from tax positions taken during a prior period		(4.0	)		(6.4	)		(4.5	)
Increases resulting from tax positions taken during the current period		7.2			10.2			7.4
Decreases related to settlements with taxing authorities		(.5	)		(6.0	)		(3.8	)
Increases related to settlements with taxing authorities		—			—			—
Reductions related to the lapse of statute of limitations		(2.6	)		(8.0	)		(5.1	)
Unrecognized tax benefits at end of year (1)	$	47.2		$	47.1		$	48.5

(1)

Included in the $47.2 million of gross unrecognized tax benefits at December 31, 2025 are $37.3 million of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate.

The Company or one of its subsidiaries files income tax returns at the U.S. federal level, in most U.S. states, and various foreign jurisdictions. All periods prior to 2022 are closed for federal examination purposes. Various combinations of subsidiaries, tax years, and jurisdictions remain open for review, subject to statute of limitations periods (typically 3 to 4 prior years). We do not expect the resolution of open audits to have a material impact on our unrecognized tax benefits.

Historical Timeline

Fiscal Year	Filed
2025	Feb 26, 2026	Showing above
2024	Feb 27, 2025

2023	Feb 26, 2024

2022	Feb 24, 2023

2021	Feb 25, 2022

2020	Feb 26, 2021

2019	Feb 27, 2020

2018	Feb 26, 2019

2017	Feb 26, 2018

2016	Feb 24, 2017

2015	Feb 25, 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.

NAVIENT CORP Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures