KB HOMEKBH
KB HOME Income Taxes Disclosure
Income Taxes
Income Tax Expense. The components of the income tax expense in our consolidated statements of operations are as
follows (in thousands):
Federal | State | Total | |||
2025 | |||||
Current | $(90,600) | $(21,100) | $(111,700) | ||
Deferred | (8,600) | (5,100) | (13,700) | ||
Income tax expense | $(99,200) | $(26,200) | $(125,400) | ||
2024 | |||||
Current | $(147,300) | $(31,500) | $(178,800) | ||
Deferred | (3,100) | (14,000) | (17,100) | ||
Income tax expense | $(150,400) | $(45,500) | $(195,900) | ||
2023 | |||||
Current | $(123,200) | $(17,200) | $(140,400) | ||
Deferred | (8,400) | (32,300) | (40,700) | ||
Income tax expense | $(131,600) | $(49,500) | $(181,100) |
Our effective tax rates were 22.6% for 2025, 23.0% for 2024 and 23.5% for 2023.
In 2025, our income tax expense and effective tax rate included the favorable impacts of $13.1 million of Section 45L tax
credits we recognized primarily from building energy-efficient homes and $8.2 million of excess tax benefits related to stock-
based compensation, partly offset by $12.9 million of non-deductible executive compensation expense. In 2024, our income
tax expense and effective tax rate reflected the favorable impacts of $19.3 million of Section 45L tax credits and $7.9 million of
excess tax benefits related to stock-based compensation, partly offset by $10.7 million of non-deductible executive
compensation expense. In 2023, our income tax expense and effective tax rate reflected the favorable impacts of $25.2 million
of Section 45L tax credits and $5.5 million of excess tax benefits related to stock-based compensation, partly offset by
$12.2 million of non-deductible executive compensation expense.
In 2025, Section 45L tax credits decreased year over year, largely reflecting the impact of guidance the IRS issued in 2023
that heightened the Section 45L energy-efficiency qualification standard for homes built in California relative to other states
and our decision to build homes in many of our markets beginning in 2025 that are highly energy efficient and qualify for
ENERGY STAR certification but do not qualify for Section 45L tax credits. We believe the additional costs necessary to
satisfy the higher standards for some of our homes outweigh the possible benefits of meeting those higher standards for both
our business and our buyers.
On July 4, 2025, the OBBBA was signed into law. Among its provisions is the repeal of Section 45L tax credits for new
energy-efficient homes delivered after June 30, 2026. As a result, beginning in our 2026 third quarter, our income tax expense
and effective tax rate will no longer reflect a benefit from such tax credits as to homes delivered after the effective date. The
other tax-related provisions of the OBBBA are not expected to have a material impact on our consolidated financial statements.
Deferred Tax Assets, Net. Deferred income taxes result from temporary differences in the financial and tax basis of assets
and liabilities. Significant components of our deferred tax liabilities and assets are as follows (in thousands):
November 30, | |||
2025 | 2024 | ||
Deferred tax liabilities: | |||
Capitalized expenses | $27,463 | $26,792 | |
State taxes | 7,860 | 9,680 | |
Depreciation and amortization | 5,169 | 8,055 | |
Other | 313 | 308 | |
Total | 40,805 | 44,835 | |
Deferred tax assets: | |||
Warranty, legal and other accruals | 49,322 | 50,360 | |
Employee benefits | 47,482 | 53,282 | |
NOLs from 2006 through 2025 | 20,280 | 21,811 | |
Capitalized expenses | 18,839 | 21,861 | |
Inventory impairment and land option contract abandonment charges | 5,261 | 7,653 | |
Partnerships and joint ventures | 2,189 | 5,879 | |
Tax credits | 410 | 2,019 | |
Other | 1,187 | 1,191 | |
Total | 144,970 | 164,056 | |
Valuation allowance | (15,500) | (16,800) | |
Total | 129,470 | 147,256 | |
Deferred tax assets, net | $88,665 | $102,421 | |
Reconciliation of Expected Income Tax Expense. The income tax expense computed at the statutory U.S. federal income
tax rate and the income tax expense provided in our consolidated statements of operations differ as follows (dollars in
thousands):
Years Ended November 30, | |||||||||||
2025 | 2024 | 2023 | |||||||||
$ | % | $ | % | $ | % | ||||||
Income tax expense computed at statutory rate | $(116,380) | (21.0)% | $(178,692) | (21.0)% | $(161,982) | (21.0)% | |||||
Tax credits | 14,726 | 2.7 | 19,321 | 2.3 | 25,218 | 3.3 | |||||
Stock compensation | 6,719 | 1.2 | 6,405 | .7 | 4,471 | .6 | |||||
Valuation allowance for deferred tax assets | 1,300 | .2 | 100 | — | 200 | — | |||||
Non-deductible compensation | (10,527) | (1.9) | (8,703) | (1.0) | (9,975) | (1.3) | |||||
State taxes, net of federal income tax benefit | (21,755) | (3.9) | (36,028) | (4.2) | (39,307) | (5.1) | |||||
Other, net | 517 | .1 | 1,697 | .2 | 275 | — | |||||
Income tax expense | $(125,400) | (22.6)% | $(195,900) | (23.0)% | $(181,100) | (23.5)% | |||||
Deferred Tax Asset Valuation Allowance. We evaluate our deferred tax assets quarterly to determine if adjustments to our
valuation allowance are required based on the consideration of all available positive and negative evidence using a “more likely
than not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors,
our historical operating results, our expectation of future profitability, the duration of the applicable statutory carryforward
periods, and conditions in the housing market and the broader economy. In our evaluation, we give more significant weight to
evidence that is objective in nature as compared to subjective evidence. Also, more significant weight is given to evidence that
directly relates to our then-current financial performance as compared to indirect or less current evidence. The ultimate
realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in
which the related deferred tax assets become deductible. The value of our deferred tax assets depends on applicable income tax
rates.
Our deferred tax assets of $104.2 million at November 30, 2025 and $119.2 million at November 30, 2024 were partially
offset in each year by valuation allowances of $15.5 million and $16.8 million, respectively. The deferred tax asset valuation
allowances at November 30, 2025 and 2024 were primarily related to certain state NOLs that had not met the “more likely than
not” realization standard at those dates. As a result of changes in state income tax rates and our utilization of certain state
NOLs, we reduced the valuation allowance by $1.3 million in 2025. As of November 30, 2025, we would need to generate
approximately $356.0 million of pretax income within certain states in future periods before 2044 to realize our deferred tax
assets. Based on the evaluation of our deferred tax assets as of November 30, 2025 and 2024, we determined that most of our
deferred tax assets would be realized.
We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a
valuation allowance with respect to our deferred tax assets. The accounting for deferred tax assets is based upon estimates of
future results. Changes in positive and negative evidence, including differences between estimated and actual results, could
result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial
statements. Changes in existing federal and state tax laws and corporate income tax rates could also affect actual tax results and
the realization of deferred tax assets over time.
The majority of the tax benefits associated with our NOLs can be carried forward for 20 years and applied to offset future
taxable income. Depending on their applicable statutory period, the state NOLs of $20.3 million, if not utilized, will begin to
expire between 2026 and 2044. In 2025, $.1 million of state NOLs expired. No state NOLs expired in 2024 or 2023.
Unrecognized Tax Benefits. Gross unrecognized tax benefits are the differences between a tax position taken or expected
to be taken in a tax return, and the benefit recognized for accounting purposes. A reconciliation of the beginning and ending
balances of gross unrecognized tax benefits, including interest and penalties, is as follows (in thousands):
Years Ended November 30, | |||||
2025 | 2024 | 2023 | |||
Balance at beginning of year | $2,922 | $2,376 | $975 | ||
Increase (decrease) related to prior years’ tax positions | (1,491) | 546 | 1,401 | ||
Balance at end of year | $1,431 | $2,922 | $2,376 | ||
Our unrecognized tax benefits are included in accrued expenses and other liabilities in our consolidated balance sheets. We
recognize accrued interest and penalties related to unrecognized tax benefits in our consolidated financial statements as a
component of the provision for income taxes.
If these unrecognized tax benefits reverse in the future, they would have a beneficial impact on our effective tax rate at that
time. During the next 12 months, it is possible that the amount of unrecognized tax benefits will change, but we are not able to
provide a range of such change. The potential change, if any, will be related to increases due to new tax positions taken and the
accrual of interest and penalties. Our total accrued interest and penalties related to unrecognized income tax benefits was
approximately $.2 million at November 30, 2025 and 2024. Because of the impact of deferred tax accounting, other than
interest and penalties, the disallowance of the shorter deductibility period would not affect our annual effective tax rate but
would accelerate the payment of cash to a tax authority to an earlier period. As of November 30, 2025, the fiscal years ending
2022 and later remain open to federal examinations, while 2021 and later remain open to state examinations.
The benefits of our deferred tax assets, including our NOLs, built-in losses and tax credits would be reduced or potentially
eliminated if we experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). Based on our
analysis performed as of November 30, 2025, we do not believe that we have experienced an ownership change as defined by
Section 382, and, therefore, the NOLs, built-in losses and tax credits we have generated should not be subject to a Section 382
limitation as of this reporting date.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jan 23, 2026 | Showing above |
| 2024 | Jan 24, 2025 | |
| 2023 | Jan 19, 2024 | |
| 2022 | Jan 20, 2023 | |
| 2021 | Jan 21, 2022 | |
| 2020 | Jan 22, 2021 | |
| 2019 | Jan 24, 2020 | |
| 2018 | Jan 24, 2019 | |
| 2017 | Jan 26, 2018 | |
| 2016 | Jan 27, 2017 | |
| 2015 | Jan 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.