Jet.AI Inc. Income Taxes Disclosure

NOTE 12 – INCOME TAXES

 

For the years ended December 31, 2025 and 2024, the Company did not record a current or deferred income tax expense or benefit due to current and historical losses incurred by the Company. The Company’s losses before income taxes consist solely of losses from domestic operations.

 

A reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:

SCHEDULE OF RECONCILIATION OF INCOME TAX EXPENSE (BENEFIT) 

Permanent differences:
		Year Ended December 31, 2025								Year Ended December 31, 2024
		Amount				%				Amount				%
Statutory US Federal tax rate		$	963,790				21.0	%		$	(2,674,021	)			21.0	%
Permanent differences:
Stock compensation			341,481				7.4	%			900,320				-7.1	%
Other			(41,301	)			-0.9	%			45,679				-0.3	%
Valuation allowance			(1,263,970	)			-27.5	%			1,728,022				-13.6	%
Total		$	-				0.0	%		$	-				0.0	%

 

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are comprised of the following:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 

		2025				2024
Deferred tax asset attributable to:
Net operating loss carryover		$	6,075,000			$	4,299,000
Deferred tax liablities attributable to:
Unrealized gain on equity investments		$	(3,040,170	)		$	-
Net deferred tax asset before valuation allowance:
Valuation allowance			(3,034,830	)			(4,299,000	)
Net deferred tax asset		$	-			$	-

 

The Company has evaluated the positive and negative evidence bearing upon its ability to realize its deferred tax assets, which are comprised primarily of net operating loss carryforwards. Management considered the impact of unrealized gains recognized during the year related to investments measured at fair value, which give rise to deferred tax liabilities associated with temporary differences. Because these gains are non cash in nature, dependent on future liquidity events, and not indicative of recurring taxable income, management concluded that such gains do not outweigh significant negative evidence. Management has considered the Company’s history of cumulative net losses in the United States, estimated future taxable income, and prudent and feasible tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its U.S. federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2025 and 2024, respectively. The Company reevaluates the positive and negative evidence at each reporting period. During the period ended December 31, 2025, the Company’s valuation allowance increased during the period by approximately $1,776,000, primarily due to the generation of a net operating loss of approximately $8,458,000. The Company paid no federal or state income taxes during the years ended December 31, 2025 and 2024.

 

 

The Company recognizes the financial statement benefit of a tax position only after determining that it is more likely than not that the position will be sustained upon examination by the relevant taxing authority. Management evaluated uncertain tax positions as of December 31, 2025 and 2024 and concluded that no reserves for unrecognized tax benefits were required. The Company does not expect its unrecognized tax benefits to change significantly within the next twelve months.

 

At December 31, 2025, the Company had federal net operating loss carry forwards of approximately $28,900,000. The federal operating losses since inception have no expiration.

 

Utilization of the U.S. federal and state net operating loss may be subject to a substantial annual limitation under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

 

The Company is subject to tax in the United States (“U.S.”) and files income tax returns in the U.S. Federal jurisdiction and several states and local jurisdictions where the Company has determined it has tax nexus. The Company is subject to U.S. Federal, state and local income tax examinations by tax authorities for tax years 2021 and forward. The Company currently is not under examination by any tax authority.