SoFi Technologies, Inc.SOFI
SoFi Technologies, Inc. Income Taxes Disclosure
Note 17. Income Taxes
Income (loss) before income taxes consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 581,509 | $ | 292,326 | $ | (131,899) | |||||||||||
Foreign(1) | (55,652) | (58,981) | (169,259) | ||||||||||||||
| Income (loss) before income taxes | $ | 525,857 | $ | 233,345 | $ | (301,158) | |||||||||||
_________________
(1)Foreign loss before income taxes for the year ended December 31, 2023 reflects the impact of goodwill impairment losses related to the Technisys reporting unit.
Income tax expense (benefit) consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current tax expense: | |||||||||||||||||
U.S. federal | $ | 5,520 | $ | 6,894 | $ | 5,842 | |||||||||||
U.S. state and local | 21,502 | 12,552 | 8,640 | ||||||||||||||
Foreign | 1,327 | 2,151 | 930 | ||||||||||||||
Total current tax expense | 28,349 | 21,597 | 15,412 | ||||||||||||||
Deferred tax expense (benefit): | |||||||||||||||||
U.S. federal | 22,267 | (127,239) | — | ||||||||||||||
U.S. state and local | (2,222) | (98,556) | (115) | ||||||||||||||
Foreign | (3,857) | (61,122) | (15,713) | ||||||||||||||
Total deferred tax expense (benefit) | 16,188 | (286,917) | (15,828) | ||||||||||||||
Income tax expense (benefit) | $ | 44,537 | $ | (265,320) | $ | (416) | |||||||||||
The income tax expense for the year ended December 31, 2025 was $44.5 million, primarily attributable to the Company’s profitability, partially offset by tax benefits for stock compensation.
The income tax benefit for the year ended December 31, 2024 was $265.3 million, primarily due to the release in the fourth quarter of a $258.4 million valuation allowance against certain deferred tax assets based on our reassessment of their realizability. The timing of this valuation allowance release was primarily due to our cumulative income combined with projections of continued profitability. Management defines cumulative income as the most recent three years of pre-tax income when adjusted for certain non-recurring, non-taxable, or non-deductible transactions.
The table below presents a reconciliation from the statutory federal income tax rate to the Company’s effective income tax rate subsequent to the adoption of ASU 2023-09:
Year Ended December 31, 2025 | |||||||||||
Amount | Percent | ||||||||||
U.S. federal statutory tax rate | $ | 110,430 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 17,118 | 3.3 | % | ||||||||
Foreign tax effects: | |||||||||||
Statutory tax rate difference between other jurisdictions and U.S. | 713 | 0.1 | % | ||||||||
Other factors | 2,003 | 0.4 | % | ||||||||
| Effect of cross-border tax laws | 642 | 0.1 | % | ||||||||
Tax credits(2) | (34,889) | (6.6) | % | ||||||||
Nontaxable or nondeductible items: | |||||||||||
Share-based compensation | (66,989) | (12.7) | % | ||||||||
Non-deductible compensation expense(3) | 11,515 | 2.2 | % | ||||||||
Other | 5,938 | 1.1 | % | ||||||||
| Other adjustments | (1,944) | (0.4) | % | ||||||||
| Effective tax rate | $ | 44,537 | 8.5 | % | |||||||
_________________
(1)State taxes in California, Florida, Maryland, Montana, Massachusetts and New York made up the majority of the tax effect in this category.
(2)Primarily relates to research and development tax credits.
(3)Reflects the impact of applying Section 162(m), which prohibits deduction of certain excess employee compensation to certain “covered employees”.
The table below presents a reconciliation of the expected income tax benefit at the statutory federal income tax rate to the income tax expense (benefit) at the effective income tax rate for the years ended December 31, 2024 and 2023, prepared under the disclosure requirements in effect prior to the adoption of ASU 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Expected income tax expense (benefit) at federal statutory rate | $ | 49,002 | $ | (63,243) | |||||||
Non-deductible compensation expense(1) | 10,786 | 15,579 | |||||||||
Share-based compensation | 6,071 | 554 | |||||||||
Tax credits(2) | (20,363) | (22,249) | |||||||||
| State and local income taxes, net of federal benefit | (66,027) | 6,725 | |||||||||
| Valuation allowance for deferred tax assets | (239,787) | 14,461 | |||||||||
Goodwill impairment | — | 51,907 | |||||||||
Other | (5,002) | (4,150) | |||||||||
Income tax benefit | $ | (265,320) | $ | (416) | |||||||
| Effective tax rate | (113.70) | % | 0.14 | % | |||||||
_________________
(1)Reflects the impact of applying Section 162(m), which prohibits deduction of certain excess employee compensation to certain “covered employees”.
(2)Primarily relates to research and development tax credits.
Income taxes paid on a cash basis consisted of the following:
| Year Ended December 31, | |||||
| 2025 | |||||
Federal income taxes paid | $ | 1,000 | |||
State and local income taxes paid: | |||||
| Florida | 4,887 | ||||
| Maryland | 2,024 | ||||
| Georgia | 1,973 | ||||
| Illinois | 1,557 | ||||
All other | 11,864 | ||||
Total state and local income taxes paid | 22,305 | ||||
Foreign income taxes paid: | |||||
| Argentina | 1,612 | ||||
All other | 3,995 | ||||
Total foreign income taxes paid | 5,607 | ||||
Total income taxes paid, net | $ | 28,912 | |||
The table below presents a reconciliation of unrecognized tax benefits:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits at beginning of year | $ | 36,235 | $ | 29,687 | $ | 23,730 | |||||||||||
Gross increases – tax positions in prior period | 493 | 2,957 | 493 | ||||||||||||||
| Gross decreases – tax positions in prior period | (87) | (1,257) | (27) | ||||||||||||||
| Gross increases – tax positions in current period | 6,979 | 5,086 | 5,491 | ||||||||||||||
| Lapse of statute of limitations | — | (238) | — | ||||||||||||||
Unrecognized tax benefits at end of year | $ | 43,620 | $ | 36,235 | $ | 29,687 | |||||||||||
As of December 31, 2025, 2024, and 2023, unrecognized tax benefits of $38.2 million, $32.4 million and $7.5 million, respectively, if recognized, would affect our effective tax rate in a future period.
Interest and penalties recorded during the years ended December 31, 2025, 2024 and 2023 were immaterial.
The table below presents the significant components of the Company’s net deferred taxes:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 123,100 | $ | 192,819 | |||||||
Tax credits | 113,746 | 91,913 | |||||||||
Capitalized research and software expenditures | 68,692 | 60,496 | |||||||||
| Operating lease liabilities | 20,101 | 18,032 | |||||||||
| Share-based compensation | 15,590 | 14,242 | |||||||||
| Accruals and other | 84,088 | 63,480 | |||||||||
| Gross deferred tax assets | 425,317 | 440,982 | |||||||||
| Valuation allowance | (38,656) | (30,653) | |||||||||
| Total deferred tax assets | $ | 386,661 | $ | 410,329 | |||||||
| Deferred tax liabilities: | |||||||||||
| Servicing rights | $ | (95,166) | $ | (87,946) | |||||||
Intangible assets | (38,589) | (51,878) | |||||||||
| Operating lease ROU assets | (18,262) | (15,509) | |||||||||
| Other | (6,734) | (7,940) | |||||||||
| Total deferred tax liabilities | (158,751) | (163,273) | |||||||||
Deferred tax assets (liabilities), net | $ | 227,910 | $ | 247,056 | |||||||
The table below details the activity of the deferred tax asset valuation allowance:
Balance at Beginning of Period | Additions | Deductions | Balance at End of Period | ||||||||||||||||||||||||||
Charged to Costs and Expenses | Charged to Other Accounts | ||||||||||||||||||||||||||||
| Year Ended December 31, 2023 | |||||||||||||||||||||||||||||
Deferred tax asset valuation allowance | $ | 318,410 | $ | 27,201 | $ | — | $ | — | $ | 345,611 | |||||||||||||||||||
| Year Ended December 31, 2024 | |||||||||||||||||||||||||||||
Deferred tax asset valuation allowance | 345,611 | 4,800 | — | (319,758) | 30,653 | ||||||||||||||||||||||||
| Year Ended December 31, 2025 | |||||||||||||||||||||||||||||
Deferred tax asset valuation allowance | 30,653 | 8,003 | — | — | 38,656 | ||||||||||||||||||||||||
In connection with recording deferred taxes, management assesses the likelihood that deferred tax assets are more likely than not to be realized. We evaluate our deferred tax assets quarterly to determine whether adjustments to our valuation allowance are appropriate in light of changes in facts and circumstances. Management reviews all evidence, both positive and negative, to determine whether it is more likely than not that our deferred tax assets are realizable. Examples of positive or negative evidence include cumulative income, projections of future profitability, future reversal of deferred tax liabilities, history of U.S. federal and material state tax attributes expiring unused, as well as tax planning strategies. Management defines cumulative income as the most recent three years of pre-tax income when adjusted for certain non-recurring, non-taxable, or non-deductible transactions. Generally, the weight we give to any particular factor is dependent upon the degree to which it can be objectively verified. As a result, we give greater weight to the recent cumulative income or loss of a relevant jurisdiction than other more subjective factors.
During 2025, we maintained a valuation allowance of $38.7 million, in certain state and foreign jurisdictions where sufficient positive evidence does not exist to support the realizability of deferred tax assets, increasing our valuation allowance by $8.0 million. Management will continue to assess the need for a valuation allowance in future periods.
During 2024, the valuation allowance decreased by $315.0 million, of which $258.4 million related to our fourth quarter assessment in which management concluded that cumulative income combined with projections of future profitability provided substantial positive evidence that outweighs the negative evidence to support the realization of certain of the Company's deferred tax assets, primarily related to U.S. and certain state jurisdictions. As a result, during the fourth quarter of 2024, the Company released $258.4 million of its valuation allowance.
During 2023, we maintained a full valuation allowance against our net deferred tax assets, in applicable jurisdictions, increasing our valuation allowance by $27.2 million.
Net operating loss carryforwards by jurisdiction:
As of December 31, 2025, the Company had federal, state, and foreign net operating loss carryforwards (prior to the application of statutory tax rates) of approximately $167.0 million, $1.1 billion and $156.6 million, respectively. Federal and foreign net operating loss carryforwards of approximately $149.1 million and $74.8 million, respectively, carry forward indefinitely, while the remaining federal and foreign net operating loss carryforwards primarily expire by 2032. Most state net operating loss carryforwards are limited and primarily expire by 2038. The carryforwards, net of the valuation allowance for certain states, are expected to be fully utilized prior to expiration.
Additionally, as of December 31, 2025, the Company had federal and state research and development credit carryforwards of $111.4 million and $36.9 million, respectively. The federal research credit carryforwards will expire beginning in 2038 and the state research credits will expire beginning in 2036.
The Company files a federal income tax return in the United States and also files in various state and foreign jurisdictions. The following are the major tax jurisdictions in which the Company operates and the earliest tax year subject to examination:
| Jurisdiction | Tax year | |||||||
| United States | 2011 | |||||||
| California | 2012 | |||||||
We are currently under examination by tax authorities in New York City and Argentina. Tax years subject to and open for examination vary by jurisdiction.
A portion of our foreign operations benefit from tax holidays. However, due to loss carryforwards, tax holidays do not result in any material cash tax benefits for any period presented. We qualify for a tax holiday in Argentina by fulfilling certain requirements of the “Regime for the Promotion of the Knowledge Economy (Law 27,506)”. The regime is in effect from January 1, 2020, through December 31, 2029. An annual application process is required for approval and to continue to qualify for the holiday. The regime reduces the statutory federal income tax rate from 35% to 28%.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
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.