Rocket Companies, Inc.RKT
Rocket Companies, Inc. Income Taxes Disclosure
Income Taxes
(Loss) income before income taxes consists of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. | $ | (248) | $ | 690 | $ | (380) | |||||||||||
| Foreign | 34 | (22) | (23) | ||||||||||||||
Total (Loss) income before income taxes | $ | (214) | $ | 668 | $ | (403) | |||||||||||
Provision for (benefit from) income taxes consists of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| U.S. Federal | $ | 5 | $ | 3 | $ | 4 | |||||||||||
| State and local | 3 | — | 1 | ||||||||||||||
| Total current | $ | 8 | $ | 3 | $ | 5 | |||||||||||
| Deferred | |||||||||||||||||
| U.S. Federal | $ | 23 | $ | 7 | $ | (9) | |||||||||||
| State and local | (11) | 22 | (9) | ||||||||||||||
| Total deferred | $ | 12 | $ | 29 | $ | (18) | |||||||||||
| Total provision for (benefit from) income taxes | $ | 20 | $ | 32 | $ | (13) | |||||||||||
The reconciliation of the U.S. Federal statutory corporate income tax rate to the Company's effective tax rate consists of the following:
| Year Ended December 31, 2025 | |||||||||||
| Dollars | Percent of Pre-tax Income | ||||||||||
| U.S. Federal statutory tax rate | $ | (45) | 21.00 | % | |||||||
| Income/loss attributable to non-controlling interest | 26 | (12.07) | |||||||||
State and local taxes, net of U.S. Federal tax benefit (1) | (6) | 2.82 | |||||||||
| Foreign tax effects | |||||||||||
| Statutory tax rate difference between Canada and U.S. | (2) | 0.91 | |||||||||
| Canada provincial taxes | 4 | (1.74) | |||||||||
| Change in valuation allowance in Canada | (9) | 4.01 | |||||||||
| Effect of changes in tax laws or rates | 24 | (11.38) | |||||||||
| Effect of cross-border tax laws | 3 | (1.61) | |||||||||
| Changes in valuation allowance | (10) | 4.77 | |||||||||
| Tax credits | (10) | 4.84 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nondeductible executive compensation | 38 | (17.67) | |||||||||
| Transaction costs | 13 | (5.83) | |||||||||
| Other nondeductible expenses | 9 | (4.16) | |||||||||
| Share-based compensation | (15) | 6.91 | |||||||||
| Effective tax rate | $ | 20 | (9.20) | % | |||||||
(1) The states that contribute to the majority of the tax effect in this category include California, Michigan, New York, Illinois, and New Jersey.
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. Federal statutory tax rate | 21.00 | % | 21.00 | % | |||||||
| Income/loss attributable to non-controlling interest | (20.26) | (12.21) | |||||||||
| State and local taxes, net of U.S. Federal tax benefit | 2.70 | 1.57 | |||||||||
| Changes in valuation allowance | 1.69 | (5.01) | |||||||||
| Nondeductible expenses | 1.19 | (1.90) | |||||||||
| Share-based compensation | (1.81) | (0.49) | |||||||||
| Other | 0.31 | 0.22 | |||||||||
| Effective tax rate | 4.82 | % | 3.18 | % | |||||||
For the years ended December 31, 2025, 2024 and 2023, the Company’s effective tax rate varies from the U.S. Federal statutory tax rate due to its organizational structure, state and local taxes inclusive of updates in its state and local deferred tax rate and valuation allowances for deferred tax benefits the Company does not believe are more likely than not to be realized. The Company accounts for the Global Intangible Low-Taxed Income tax expense in the period in which it is incurred.
Rocket Limited Partnership is a partnership for U.S. federal tax purposes and in most applicable jurisdictions for state and local income tax purposes. As a partnership, Rocket Limited Partnership is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Rocket Limited Partnership is passed through and included in the taxable income or loss of its members, including Rocket Companies, in accordance with the terms of the limited partner agreement of Rocket Limited Partnership. Rocket Companies is a C Corporation and is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income of Rocket Limited Partnership.
Prior to the Up-C Collapse, Rocket Companies owned only a portion of Holdings LLC Units. Through the Up-C Collapse and conversion of Holdings LLC to Rocket Limited Partnership, Rocket Companies acquired the Holdings Units held by Rocket Companies’ chairman and RHI which have a book basis that is higher than the tax basis in the investment of Holdings. As of June 30, 2025, the date of the Up-C Collapse, this basis difference decreased the Company’s Deferred tax asset, net of valuation allowance by $397 and increased the Company’s Deferred tax liability by $894, resulting in a corresponding adjustment to Additional paid-in capital of $1,291 as a direct result of the transaction. After the Up-C Collapse and the conversion of Holdings LLC to Rocket Limited Partnership, the Company holds, indirectly, 100% of the voting and economic interests of Rocket Limited Partnership.
Redfin is a direct wholly owned subsidiary of Rocket Companies and as a C Corporation is included in the Rocket Companies consolidated federal tax return after the acquisition. Redfin is subject to state and local income taxes. Included within Redfin's opening balance sheet is $21 of uncertain tax positions related to prior year tax positions that have been netted against the applicable deferred tax asset on the opening balance sheet.
Mr. Cooper is an indirect wholly owned subsidiary of Rocket Companies and is included in the Rocket Limited Partnership federal tax return after the acquisition. Mr. Cooper is subject to state and local income taxes. Included within Mr. Cooper's opening balance sheet is $13 of uncertain tax positions related to prior year tax positions on the opening balance sheet.
Several subsidiaries of Rocket Limited Partnership, such as Rocket Mortgage, Rocket Close and other subsidiaries, are single member LLC entities. As single member LLCs of Rocket Limited Partnership, all taxable income or loss generated by these subsidiaries passes through and is included in the income or loss of Rocket Limited Partnership. A provision for state and local income taxes is required for certain jurisdictions that tax single member LLCs as regarded entities. Other subsidiaries of Rocket Limited Partnership, such as RTIC, LMB Mortgage Services and others, are treated as C Corporations and separately file and pay taxes apart from Rocket Limited Partnership in various jurisdictions including but not limited to U.S. federal, state, local and Canada.
Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities. The Company’s deferred tax (liabilities) assets arise from the following components of temporary differences and carryforwards:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net operating loss and credit carryforwards | $ | 643 | $ | 207 | |||||||
| Depreciable and amortizable assets, net | 76 | 16 | |||||||||
| Debt and interest expense carryforwards | 65 | 6 | |||||||||
| Other deferred tax assets and liabilities, net | 20 | (13) | |||||||||
| Investment in partnership | (1,345) | 464 | |||||||||
| Intangible assets, net | (223) | (18) | |||||||||
| Valuation allowance | (74) | (158) | |||||||||
| Net deferred tax (liabilities) assets | $ | (838) | $ | 504 | |||||||
Deferred income taxes are presented on the Consolidated Balance Sheets based on their tax jurisdictions as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax asset, net of valuation allowance | $ | 12 | $ | 522 | |||||||
| Deferred tax liability (included in Other liabilities) | (850) | (18) | |||||||||
Net deferred tax (liabilities) assets | $ | (838) | $ | 504 | |||||||
As of December 31, 2025, the Company has a deferred tax asset before any valuation allowance of $82 and a deferred tax liability of $850. As of December 31, 2024, the Company had a deferred tax asset before any valuation allowance of $680 and a deferred tax liability of $18. The Company's deferred tax (liability) asset relates primarily to the difference in the tax and book basis of Rocket Companies’ investment in Holdings. The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. After considering all those factors, as of December 31, 2025 and 2024, respectively, management has recorded $74 and $158 of a valuation allowance for certain deferred tax assets the Company has determined are not more likely than not to be realized.
Changes in the deferred tax (liability) asset, net of valuation allowance for the investment in partnership recorded against Additional Paid-in Capital that occurred during the years ended December 31, 2025 and 2024 are included within Change in controlling interest of investment, net and Share-based compensation, net in the Consolidated Statements of Changes in Equity.
Of the $643 deferred tax assets related to the net operating loss and credit carryforwards at December 31, 2025, there are deferred tax assets related to federal net operating loss and credit carryforwards of $536 of which $119 will expire between 2026 and 2045 and $417 has no expiration, deferred tax assets related to state and local net operating loss and credit carryforwards of $89 of which $72 will expire between 2026 and 2045 and $17 has no expiration, and deferred tax assets related to foreign net operating loss and credit carryforwards of $18 which will expire between 2037 and 2045.
The Company recognizes uncertain income tax positions when it is not more likely than not a tax position will be sustained upon examination. As of December 31, 2025 and 2024, the Company has not recognized any material uncertain tax positions in operations. The Company has recorded uncertain tax positions related to the opening balance sheets of Redfin and Mr. Cooper. The Company accrues interest and penalties related to uncertain tax positions as a component of the income tax provision. No interest or penalties were recognized in income tax expense in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss). The Company recognized $5 and zero of interest and penalties related to uncertain tax positions recognized on the Consolidated Balance Sheets as of December 31, 2025 and 2024. The total amount of uncertain tax positions that, if recognized, would impact the effective income tax rate were $10 and zero as of December 31, 2025 and 2024, respectively. Tax positions taken in tax years that remain open under the statute of limitations will be subject to examinations by tax authorities. With few exceptions, the Company is no longer subject to examinations by tax authorities for tax years ended December 31, 2017 or prior.
Below is a reconciliation of the changes in the federal and state uncertain tax position balances, exclusive of interest and penalties.
Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance - beginning of year | $ | — | $ | — | $ | — | |||||||||||
| Increases in tax positions of prior years | 34 | — | — | ||||||||||||||
| Decreases in tax positions as a result of lapses in statute | — | — | — | ||||||||||||||
| Settlements | — | — | — | ||||||||||||||
| Balance - end of year | $ | 34 | $ | — | $ | — | |||||||||||
The following represents the taxes paid by jurisdiction:
Year Ended December 31, | |||||
| 2025 | |||||
U.S. Federal | $ | 1 | |||
| Various states | 1 | ||||
| Foreign | — | ||||
Tax Receivable Agreement
We are party to a Tax Receivable Agreement, dated as of August 5, 2020, with RHI II that provides for the payment by us to RHI and Mr. Gilbert (or their transferees of Holdings LLC Units of Holdings LLC or other assignees) of 90% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize (computed using simplifying assumptions to address the impact of state and local taxes) as a result of: (i) certain increases in our allocable share of the tax basis in Holdings LLC’s assets resulting from (a) the purchases of Holdings LLC Units (along with the corresponding shares of Class D common stock or Class C common stock) from RHI and Mr. Gilbert (or their transferees of Holdings LLC Units or other assignees) using the net proceeds from our IPO or in any future offering (subject to the terms of the Tax Receivable Agreement Amendment (as defined above)), (b) exchanges by RHI and Mr. Gilbert (or their transferees of Holdings LLC Units or other assignees) of Holdings LLC Units (along with the corresponding shares of Class D common stock or Class C common stock) for cash or shares of Class B common stock or Class A common stock, as applicable (subject to the terms of the Tax Receivable Agreement Amendment), or (c) payments under the Tax Receivable Agreement; (ii) tax benefits related to imputed interest deemed arising as a result of payments made under the Tax Receivable Agreement; and (iii) disproportionate allocations (if any) of tax benefits to Holdings LLC as a result of section 704(c) of the Code, as amended, that relate to the reorganization transactions undertaken at the time of our IPO. The Tax Receivable Agreement makes certain simplifying assumptions regarding the determination of the cash savings that we realize or are deemed to realize from the covered tax attributes, which may result in payments pursuant to the Tax Receivable Agreement in excess of those that would result if such assumptions were not made.
As part of RHI’s internal reorganization, RHI contributed its rights to receive payments under the Tax Receivable Agreement in respect of RHI’s prior exchanges to RHI II, and RHI II completed a joinder to become a party to the Tax Receivable Agreement. As part of the Up-C Collapse, (i) Mr. Gilbert exchanged all of his Holdings LP Units and Class D common stock in exchange for shares of Class L common stock and (ii) the Tax Receivable Agreement was amended to provide that the terms of the Tax Receivable Agreement will not apply to any exchanges, including, for the avoidance of doubt, any fully paid and nonassessable Holdings LP Units exchanged as part of the Up-C Collapse (such as those exchanged by Mr. Gilbert), that occur, or are deemed to occur, on or following March 9, 2025.
As of December 31, 2025 and 2024, the Company had a liability for the Tax Receivable Agreement of $590 and $581, respectively, included within on the Consolidated Balance Sheets. A payment of $1 was made to RHI pursuant to the Tax Receivable Agreement during the year ended December 31, 2025. No payment was made to RHI pursuant to the Tax Receivable Agreement during the year ended December 31, 2024. Subsequent to December 31, 2025, a payment of $6 was made to RHI II pursuant to the Tax Receivable Agreement.
The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character and timing of the taxable income of Rocket Companies in the future. Any such changes in these factors or changes in the Company’s determination of the need for a valuation allowance related to the tax benefits acquired under the Tax Receivable Agreement could adjust the Tax Receivable Agreement liability recognized and recorded within earnings in future periods.
In addition, the Tax Receivable Agreement provides that in the case of a change in control of the Company or a material breach of our obligations under the Tax Receivable Agreement, we are required to make a payment to RHI II and Dan Gilbert in an amount equal to the present value of future payments (calculated using a discount rate equal to the lesser of 6.50% or a rate based on the benchmark rate used to determine pricing or interest rates in a majority of our then-outstanding repurchase or warehouse agreements or other financing arrangements providing for the financing of mortgage loans plus 100 basis points, which may differ from our, or a potential acquirer’s, then-current cost of capital) under the Tax Receivable Agreement, which payment would be based on certain assumptions, including those relating to our future taxable income. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our, or a potential acquirer’s, liquidity and could have the effect of delaying, deferring, modifying or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. These provisions of the Tax Receivable Agreement may result in situations where RHI II, having assumed RHI’s rights under the Tax Receivable Agreement, and Dan Gilbert have interests that differ from or are in addition to those of our other stockholders. In addition, we could be required to make payments under the Tax Receivable Agreement that are substantial, significantly in advance of any potential actual realization of such further tax benefits, and in excess of our, or a potential acquirer’s, actual cash savings in income tax.
Furthermore, Rocket Companies may elect to terminate the Tax Receivable Agreement early by making an immediate payment equal to the present value of the anticipated future cash tax savings (calculated using a discount rate equal to the lesser of 6.50% or the applicable base rate plus 100 basis points). In determining such anticipated future cash tax savings, the Tax Receivable Agreement includes several assumptions, including that (i) any Holdings Units that have not been exchanged are deemed exchanged for the market value of the shares of Class A common stock at the time of termination, (ii) Rocket Companies will have sufficient taxable income in each future taxable year to fully realize all potential tax savings, (iii) Rocket Companies will have sufficient taxable income to fully utilize any remaining net operating losses subject to the Tax Receivable Agreement in the taxable year of the election or future taxable years, (iv) the tax rates for future years will be those specified in the law as in effect at the time of termination and (v) certain non-amortizable assets are deemed disposed of within specified time periods.
As a result of the change in control provisions and the early termination right, Rocket Companies could be required to make payments under the Tax Receivable Agreement that are greater than or less than the specified percentage of the actual cash tax savings that Rocket Companies realizes in respect of the tax attributes subject to the Tax Receivable Agreement (although any such overpayment would be taken into account in calculating future payments, if any, under the Tax Receivable Agreement) or that are prior to the actual realization, if any, of such future tax benefits. Also, the obligations of Rocket Companies would be automatically accelerated and be immediately due and payable in the event that Rocket Companies breaches any of its material obligations under the agreement and in certain events of bankruptcy or liquidation. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity.
Tax Distributions
Prior to the Up-C Collapse, the holders of Holdings LLC Units, including Rocket Companies Inc., incurred U.S. federal, state and local income taxes on their share of any taxable income of Holdings LLC. The operating agreement of Holdings LLC provided for pro rata cash distributions (“tax distributions”) to the holders of the Holdings LLC Units in an amount generally calculated to provide each holder of Holdings LLC Units with sufficient cash to cover its tax liability in respect of the Holdings LLC Units. In general, these tax distributions were computed based on Holdings LLC’s estimated taxable income, multiplied by an assumed tax rate as set forth in the operating agreement of Holdings LLC. As a result of the Up-C Collapse and the conversion of Holdings LLC to Rocket Limited Partnership, the Company holds, indirectly, 100% of the voting and economic interests of Rocket Limited Partnership and will be taxed on all taxable income at Rocket Limited Partnership. Any future tax distributions after the Up-C Collapse would remain within the consolidated financial reporting group.
For the years ended December 31, 2025 and 2024, Holdings paid tax distributions totaling $114 and $14, respectively, to holders of Holdings Units other than Rocket Companies.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 24, 2021 | |
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.