STARWOOD PROPERTY TRUST, INC.STWD
STARWOOD PROPERTY TRUST, INC. Income Taxes Disclosure
Income Taxes
Certain of our domestic subsidiaries have elected to be treated as taxable REIT subsidiaries (“TRSs”). TRSs permit us to participate in certain activities from which REITs are generally precluded, as long as these activities meet specific criteria, are conducted within the parameters of certain limitations established by the Code and are conducted in entities which elect to be treated as taxable subsidiaries under the Code. To the extent these criteria are met, we will continue to maintain our qualification as a REIT.
Our TRSs engage in various real estate related operations, including special servicing of commercial real estate, originating and securitizing mortgage loans, and investing in entities which engage in real estate-related operations. As of December 31, 2025 and 2024, approximately $2.7 billion and $2.9 billion of assets were owned by TRS entities. Our TRSs are not consolidated for U.S. federal income tax purposes, but are instead taxed as corporations. For financial reporting purposes, a provision for current and deferred taxes is established for the portion of earnings recognized by us with respect to our interest in TRSs.
Our income tax provision (benefit) consisted of the following for the years ended December 31, 2025, 2024 and 2023 (in thousands):
For the Year Ended December 31, | ||||||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | 4,459 | $ | 2,635 | $ | 554 | ||||||||||||||
| State | 728 | 1,065 | (31) | |||||||||||||||||
| Total current | 5,187 | 3,700 | 523 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | 23,004 | 16,883 | 98 | |||||||||||||||||
| State | 8,528 | 4,849 | (1,303) | |||||||||||||||||
| Total deferred | 31,532 | 21,732 | (1,205) | |||||||||||||||||
Total income tax provision (benefit) | $ | 36,719 | $ | 25,432 | $ | (682) | ||||||||||||||
Income taxes paid consisted of the following for the years ended December 31, 2025, 2024 and 2023 (in thousands):
For the Year Ended December 31, | ||||||||||||||||||||
2025 | 2024 | 2023 | ||||||||||||||||||
| Federal | $ | 338 | $ | 2,639 | $ | 1,293 | ||||||||||||||
State (1) | 358 | 1,371 | 377 | |||||||||||||||||
Total income taxes paid | $ | 696 | $ | 4,010 | $ | 1,670 | ||||||||||||||
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(1)Income taxes paid by jurisdiction which exceeded 5% of the total income taxes paid are immaterial.
Deferred income taxes in our U.S. tax jurisdiction reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the tax effects of temporary differences on net deferred tax assets which are classified in our consolidated balance sheets within other assets at December 31, 2025 and December 31, 2024 (in thousands):
| December 31, | ||||||||||||||
2025 | 2024 | |||||||||||||
| Deferred tax assets/(liabilities), net | ||||||||||||||
| Reserves and accruals | $ | 4,624 | $ | 4,887 | ||||||||||
| Domestic intangible assets | (38,756) | (29,962) | ||||||||||||
| Investments in unconsolidated entities | (4,315) | (2,289) | ||||||||||||
Net operating loss and interest expense carryforwards | 43,990 | 64,411 | ||||||||||||
| Other U.S. temporary differences | (20) | 8 | ||||||||||||
Net deferred tax assets | $ | 5,523 | $ | 37,055 | ||||||||||
Unrecognized tax benefits were not material as of and during the years ended December 31, 2025 and 2024. The Company’s tax returns are no longer subject to audit for years ended prior to January 1, 2022. There was no pre-tax income from foreign operations during the years ended December 31, 2025, 2024 and 2023.
The following table is a reconciliation of our U.S. federal income tax provision (benefit) determined using our statutory federal tax rate to our reported income tax provision (benefit) for the years ended December 31, 2025, 2024 and 2023 (dollars in thousands):
| For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Federal statutory tax rate | $ | 100,761 | 21.0 | % | $ | 85,262 | 21.0 | % | $ | 87,670 | 21.0 | % | ||||||||||||||||||||||||||
| REIT and other non-taxable income | (71,436) | (14.9) | % | (64,567) | (15.9) | % | (88,281) | (21.2) | % | |||||||||||||||||||||||||||||
State and local income taxes, net of federal effect (1) | 7,312 | 1.6 | % | 5,372 | 1.3 | % | (159) | — | % | |||||||||||||||||||||||||||||
| Other | 82 | — | % | (635) | (0.2) | % | 88 | — | % | |||||||||||||||||||||||||||||
| Effective tax rate | $ | 36,719 | 7.7 | % | $ | 25,432 | 6.2 | % | $ | (682) | (0.2) | % | ||||||||||||||||||||||||||
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(1)State and local income taxes in Florida and New York made up the majority (greater than 50%) of the tax effect in this category during the year ended December 31, 2025.
There were no valuation allowances for deferred tax assets during the years ended December 31, 2025, 2024 and 2023.
As of December 31, 2025, our federal net operating loss (“NOL”) carryforwards for income tax purposes totaled $151.5 million. All of these NOLs can also be carried forward for state tax purposes, in addition to another net $21.4 million. The federal net operating loss carryforwards do not expire. If not utilized, the state net operating loss carryforwards will not begin to expire significantly until 2042. Such NOL primarily relates to unrealized fair value losses during the year ended December 31, 2022 on residential loans held in a TRS.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 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.