Opendoor Technologies Inc.OPEN
Opendoor Technologies Inc. Income Taxes Disclosure
INCOME TAXES
The following table summarizes components of loss before income taxes as follows (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Domestic | $ | (1,301) | $ | (393) | $ | (274) | |||||||||||
Foreign | 1 | 2 | — | ||||||||||||||
Loss before Income Taxes | $ | (1,300) | $ | (391) | $ | (274) | |||||||||||
The following table summarizes the components of the Company’s provision for income taxes for the periods presented (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income tax expense: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | 1 | 1 | ||||||||||||||
Foreign | — | — | — | ||||||||||||||
| Total current income tax expense | — | 1 | 1 | ||||||||||||||
| Income Tax Provision | $ | — | $ | 1 | $ | 1 | |||||||||||
For the years ended December 31, 2025, 2024, and 2023, the Company did not record any deferred federal and state income tax expense or benefit due to the full valuation allowance. Additionally, the Company’s foreign deferred expense or benefit was immaterial.
Effective Tax Rate
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows (in millions):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| U. S. Federal tax benefit at statutory rate | $ | (273) | 21.0 | % | |||||||
| Change in valuation allowance, net | 59 | (4.5) | |||||||||
Nontaxable or nondeductible items: | |||||||||||
| Deduction limitation on executive compensation | 27 | (2.1) | |||||||||
| Share-based compensation | (7) | 0.5 | |||||||||
Loss on debt extinguishment | 194 | (14.9) | |||||||||
Income Tax Expense | $ | — | — | % | |||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before taxes prior to the adoption of ASU 2023-09 is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U. S. Federal tax benefit at statutory rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal benefit | 3.6 | 5.8 | |||||||||
| Non-deductible expenses and other | 0.1 | (1.1) | |||||||||
| Share-based compensation | (3.2) | (6.6) | |||||||||
| Deduction limitation on executive compensation | (0.2) | (0.5) | |||||||||
Impact of deconsolidation | (1.9) | — | |||||||||
| Change in valuation allowance, net | (19.7) | (20.6) | |||||||||
| Research and development credits | 0.1 | 1.5 | |||||||||
| Effective tax rate | (0.2) | % | (0.5) | % | |||||||
For the year ended December 31, 2025, the Company’s effective tax rate differs from the amount computed by applying the U.S. federal statutory and state income tax rates to net loss before income tax, primarily as the result of loss on debt extinguishment, stock-based compensation, and changes in the Company’s valuation allowance. For the years ended December 31, 2024 and 2023, the Company’s effective tax rate differs from the amount computed by applying the U.S. federal statutory and state income tax rates to net loss before income tax, primarily as the result of state income taxes, stock-based compensation, and changes in the Company’s valuation allowance.
In December 2021, the Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion Profit Shifting released Model Global Anti-Base Erosion rules (“Model Rules”) under Pillar Two. The Model Rules set forth the “common approach” for a Global Minimum Tax at 15 percent for multinational enterprises with a turnover of more than 750 million Euros. Certain aspects of Pillar Two were effective January 1, 2024 and other aspects were effective January 1, 2025. Various countries have adopted legislation and other countries are in the process of introducing legislation to implement Pillar Two. Pillar Two did not have a material impact on the Company’s consolidated financial position or results of operations.
Deferred Taxes
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income taxes purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows (in millions):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Accruals and reserves | $ | 14 | $ | 14 | |||||||
| Inventory | 15 | 25 | |||||||||
| Tax credits | 49 | 49 | |||||||||
| Lease Liabilities | 2 | 57 | |||||||||
| Section 174 capitalization | 42 | 74 | |||||||||
| Goodwill | 7 | 7 | |||||||||
| Net operating loss | 743 | 633 | |||||||||
| Total deferred tax assets | 872 | 859 | |||||||||
| Less: Valuation allowance | (868) | (795) | |||||||||
| Deferred tax assets, net of valuation allowance | 4 | 64 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | (2) | (7) | |||||||||
| Right-of-use assets | (2) | (57) | |||||||||
| Deferred tax liabilities | (4) | (64) | |||||||||
| Net deferred tax assets and liabilities | $ | — | $ | — | |||||||
A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized in a particular tax jurisdiction. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. Due to the losses the Company generated in the current and prior years, the Company believes it is not more likely than not that all of the deferred tax assets can be realized for its U.S. federal and state deferred tax assets. Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $868 million as of December 31, 2025 and a full valuation allowance on its net deferred tax assets of $795 million as of December 31, 2024. The valuation allowance increased by $73 million and $77 million for 2025 and 2024, respectively primarily as a result of current year losses.
As of December 31, 2025, the Company had U.S. federal and state net operating loss (“NOL”) carryforwards of $3.0 billion and $2.4 billion, respectively, which will each begin to expire in 2034 if not utilized. For NOLs arising after December 31, 2017, the Tax Cuts and Jobs Act of 2017 limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income and can be carried forward indefinitely (carryback is generally prohibited). In the Company’s case, as of December 31, 2025, $2.9 billion of US. federal NOLs and $803 million of state NOLs have an unlimited carryover period. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation and will continue to have a two-year carryback and twenty-year carryforward period. Additionally, as of December 31, 2025, the Company had U.S. federal research tax credit carryforwards of $45 million that begin to expire in 2035. The Company also had state research tax credit carryforwards of $31 million with an indefinite carryforward period.
Section 382 of the Internal Revenue Code (the “Code”) limits the use of net operating losses and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. Utilization of the net operating loss carryforwards are subject to various limitations due to the ownership change limitations provided by Internal Revenue Code (IRC) Section 382 and similar state provisions. The Company performed an ownership analysis and identified three previous ownership changes in 2014, 2016 and 2020, as defined under Section 382 and 383 of the IRC, however none of the previous
ownership changes resulted in a material limitation that will reduce the total amount of net operating loss carryforwards and credits that can be utilized.
On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law. The Act includes significant changes to the U.S. tax code, including restoration of immediate recognition of domestic research and development expenditures and reinstatement of 100% bonus depreciation for qualifying property. The Company has evaluated the impact of the Act on its consolidated financial statements, including the effects on its deferred tax assets and liabilities and has not identified any material impact on its Annual Report on Form 10-K for the calendar year ended December 31, 2025.
The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, effective January 1, 2025. The amendments were applied prospectively and did not have a material impact on the Company’s consolidated financial statements.
Unrecognized Tax Benefits
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits as of the beginning of the year | $ | 23 | $ | 22 | $ | 20 | |||||||||||
| Increase related to current year tax provisions | — | 1 | 2 | ||||||||||||||
| Unrecognized tax benefits as of the end of the year | $ | 23 | $ | 23 | $ | 22 | |||||||||||
Due to the full valuation allowance at December 31, 2025, current adjustments to the unrecognized tax benefit will have no impact on the Company’s effective income tax rate. There would be an impact of $23 million to the effective tax rate if adjustments are made after the valuation allowance is released.
The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s consolidated balance sheets. To date, the Company has not recognized nor accrued for any material interest and penalties in its consolidated statements of operations. The Company is subject to federal and state income taxes in the United States, and foreign income taxes in Canada and India. Due to the history of net operating losses, the Company is subject to U.S. federal, state and local examinations by tax authorities for all years since incorporation. As of December 31, 2025, the Company is not currently under any audits that would materially change the unrecognized tax benefits recorded.
The Company has not provided U.S. income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2025, because it intends to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place under the Tax Cuts and Jobs Act of 2017.
The amount of cash income taxes paid by the Company during the year ended December 31, 2025 was immaterial.
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.