Neuraxis, INC Income Taxes Disclosure

19. Income Taxes

 

The income tax provision consists of:

 Schedule of Income Tax Provision

		2025				2024
		For the Years Ended December 31,
		2025				2024
Total current provision		$	-			$	-
Deferred:
Federal			(1,541,974	)			(1,561,596	)
State			(461,972	)			(634,364	)
Total deferred benefit			(2,003,946	)			(2,195,960	)
Valuation allowance			2,003,946				2,195,960
Total income tax provision		$	—			$	—

 

A reconciliation of the U.S. federal statutory income tax rate to the effective income tax rate is as follows:

 Schedule of Federal Statutory Income Tax Rate and Effective Income Tax Rate

		For the Years Ended December 31,
		2025								2024
		Amount				Rate				Amount				Rate
Federal statutory income tax rate		$	1,638,117			$	21.0	%			1,730,715				21.0	%
State rate, net of valuation allowance and federal benefit			215				—				(14,883	)			(0.2	)
Change in federal valuation allowance			(1,637,466	)			(21.0	)			(1,797,167	)			(21.8	)
Other			(866	)			—				81,335				1.0
Effective income tax rate		$	—				—	%		$	—				—	%

 

(a)	State taxes in Indiana and California comprise the majority of this category.

 

 

Neuraxis, Inc.

Notes to Financial Statements

 

The Company did not recognize an income tax provision for the years ended December 31, 2025 and 2024 due to net operating losses reported in both years.

 

The Company did not pay any federal income taxes for the years ended December 31, 2025 and 2024. The Company received income tax refunds from the state of Indiana totaling $13,140 and $10,164 for the years ended December 31, 2025 and 2024, respectively.

 

On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (“OBBBA”), Public Law No. 119-21, which includes significant changes to U.S. federal tax law. Key provisions of the OBBBA include, among other items, the extension of certain Tax Cuts and Jobs Act of 2017 (“TCJA”) provisions, permanent reinstatement of 100% bonus depreciation for qualifying property and modifications to various deductions and credits within the Internal Revenue Code.

 

Under U.S. GAAP, the effects of changes in tax law are recognized in the period that includes the enactment date. Accordingly, the Company evaluated the provisions of the OBBBA during the year ended December 31, 2025. Based on the Company’s preliminary analysis, the enactment of the OBBBA did not result in a material change to the Company’s effective tax rate for the year ended December 31, 2025. 

 

The Company continues to evaluate the full impact of the OBBBA, including interpretive guidance that may be issued by the U.S. Department of the Treasury and the Internal Revenue Service. As additional guidance becomes available, the Company may refine its estimates related to the accounting for income taxes under ASC 740.

 

Deferred income taxes are provided for temporary differences between the financial and tax bases of the Company’s assets and liabilities. The temporary differences that give rise to net deferred tax assets and liabilities were as follows:

 

 Schedule of Net Deferred Tax Assets and Liabilities

		2025				2024
		December 31,
		2025				2024
Deferred tax assets:
Net operating losses		$	11,004,401			$	9,222,603
Stock based compensation			1,628,094				1,447,339
Accrued compensation			298,201				266,816
Notes receivable reserve			260,362				296,297
Operating lease payable			68,977				143,484
Accounts payable			23,784				84,105
Other			361,132				149,168
Total gross deferred tax assets			13,644,951				11,609,812
Valuation allowance			(13,375,770	)			(11,371,824	)
Total deferred tax assets		$	269,181			$	237,988
Deferred tax liabilities:
Prepaid expenses		$	81,050			$	74,991
Operating lease right of use asset			67,241				72,560
Accounts receivable			50,310				64,443
Other			70,580				25,994
Total deferred tax liabilities			269,181				237,988
Deferred tax assets, net		$	—			$	—

 

 

Neuraxis, Inc.

Notes to Financial Statements

 

Management assessed the realizability of its deferred tax assets and determined that it is more likely than not that the Company will not recognize the benefits of the net deferred tax assets due to a history of operating losses. As a result, the Company maintained a full valuation allowance and does not reflect any deferred taxes in its Balance Sheets as of December 31, 2025 and 2024.

 

On December 31, 2025, the Company’s federal and state net operating loss (NOL) carryforwards totaled $43,160,139 and $41,230,553 respectively. These NOL carryforwards may be offset against future taxable income. There is no limitation on the number of years to utilize the federal NOLs. The federal deduction will be limited to 80% of modified taxable income. The state NOLs are allowed up to 100% of taxable income and generally can be carried forward no longer than 20 years after the year of the taxable loss.

 

Federal and state tax laws impose limitations on the utilization of NOLs and credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Accordingly, the Company’s ability to utilize these carryforwards may be limited as a result of an ownership change. Such an ownership change could result in a limitation in the use of the NOLs in future years and possibly a reduction of the net operating losses available.

 

If not used, the state NOL carryforwards will expire as follows:

 Schedule of State Carryforwards

2037		$	72,216
2038			1,039,986
2039			2,033,750
2040			4,457,495
2041			2,406,225
Thereafter			31,102,107
No expiration			118,774
Total state NOL carryforwards		$	41,230,553

 

The Company believes it has made adequate provision for all income tax uncertainties. The assessment is subject to change based on the completion of audits or statute of limitation expirations.

 

The federal and state income tax returns have a three-year statute of limitations once filed with the appropriate jurisdiction. The Company’s income tax returns are subject to examination by the federal and state taxing authorities in the United States for the years ended December 31, 2022 through 2025.

 

 

Neuraxis, Inc.

Notes to Financial Statements