TARGET CORPTGT
TARGET CORP Income Taxes Disclosure
Income Taxes
Earnings before income taxes were $4.8 billion, $5.3 billion, and $5.3 billion during 2025, 2024, and 2023, respectively, including $0.8 billion, $1.1 billion, and $1.2 billion earned by our foreign entities subject to tax outside of the U.S.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), which expands income tax disclosure requirements, primarily related to the effective tax rate reconciliation and income taxes paid. We adopted the standard prospectively in fiscal 2025.
| Tax Rate Reconciliation | 2025 | |||||||
(dollars in millions) | Amount | Percent | ||||||
| U.S. federal statutory rate | $ | 1,001 | 21.0 | % | ||||
State and local income taxes, net of federal income tax effects (a) | 168 | 3.5 | ||||||
| Foreign tax effects | ||||||||
| Hong Kong | (72) | (1.5) | ||||||
| Other foreign jurisdictions | 15 | 0.3 | ||||||
| Effect of cross-border tax laws | 25 | 0.5 | ||||||
| Tax credits | (77) | (1.6) | ||||||
Nontaxable or nondeductible Items (b) | (16) | (0.3) | ||||||
| Changes in unrecognized tax benefits | 19 | 0.4 | ||||||
| Other adjustments | (1) | — | ||||||
| Effective tax rate | $ | 1,062 | 22.3 | % | ||||
(a) State taxes in California, New York, Illinois, and Minnesota contributed to the majority of the tax effect in this category.
(b) The tax effects of share based compensation are classified within nontaxable or nondeductible items in the effective tax rate reconciliation for 2025.
Tax Rate Reconciliation for years prior to the adoption of ASU 2023-09 | 2024 | 2023 | ||||||
Percent | Percent | |||||||
U.S. federal statutory rate | 21.0 | % | 21.0 | % | ||||
State and local income taxes, net of federal income tax effects | 3.7 | 3.8 | ||||||
| International | (1.1) | (1.3) | ||||||
| Excess tax benefit related to share-based payments | (0.1) | (0.3) | ||||||
| Federal tax credits | (0.8) | (0.8) | ||||||
| Other | (0.5) | (0.5) | ||||||
| Effective tax rate | 22.2 | % | 21.9 | % | ||||
Provision for Income Taxes (millions) | 2025 | 2024 | 2023 | ||||||||
| Current: | |||||||||||
| Federal | $ | 819 | $ | 1,013 | $ | 556 | |||||
| State | 202 | 236 | 208 | ||||||||
| International | 96 | 101 | 97 | ||||||||
| Total current | 1,117 | 1,350 | 861 | ||||||||
| Deferred: | |||||||||||
| Federal | (72) | (184) | 256 | ||||||||
| State | 11 | 2 | 43 | ||||||||
| International | 6 | 2 | (1) | ||||||||
| Total deferred | (55) | (180) | 298 | ||||||||
| Total provision | $ | 1,062 | $ | 1,170 | $ | 1,159 | |||||
Income Taxes Paid, Net of Refunds (millions) | 2025 | ||||
Federal taxes (a) | $ | 781 | |||
| State taxes | |||||
| California | 74 | ||||
| Other | 197 | ||||
| International taxes | 39 | ||||
| Total income taxes paid | $ | 1,091 | |||
(a) Includes amounts paid for the purchase of federal transferable tax credits.
We made cash payments of $1,055 million and $374 million for income taxes, net of refunds, during 2024 and 2023, respectively. Due to deferred tax effects and other payment and refund timing differences, income tax payments are not necessarily indicative of our current tax expense or future cash obligations.
Net Deferred Tax Asset / (Liability) (millions) | January 31, 2026 | February 1, 2025 | ||||||
| Gross deferred tax assets: | ||||||||
| Accrued and deferred compensation | $ | 449 | $ | 423 | ||||
| Accruals and reserves not currently deductible | 252 | 260 | ||||||
| Self-insured benefits | 234 | 207 | ||||||
| Lease liabilities | 1,534 | 1,600 | ||||||
| Other | 144 | 159 | ||||||
| Total gross deferred tax assets | 2,613 | 2,649 | ||||||
| Gross deferred tax liabilities: | ||||||||
| Property and equipment | (2,669) | (2,830) | ||||||
| Leased assets | (1,374) | (1,425) | ||||||
| Inventory | (591) | (484) | ||||||
| Other | (231) | (203) | ||||||
| Total gross deferred tax liabilities | (4,865) | (4,942) | ||||||
Total net deferred tax liability (a) | $ | (2,252) | $ | (2,293) | ||||
(a)$13 million and $10 million of the balances as of January 31, 2026, and February 1, 2025, respectively, is included in Other Noncurrent Assets.
As of January 31, 2026, we had gross tax loss carryforwards of $1.2 billion in Canada and $0.2 billion in Luxembourg. The losses are deemed to have a remote possibility of realization; therefore, a deferred tax asset and valuation allowance are not established.
We file a U.S. federal income tax return and income tax returns in various states and foreign jurisdictions. The U.S. Internal Revenue Service (IRS) is currently auditing certain aspects of our U.S. federal income tax returns for 2021-2024, including transfer pricing matters. The IRS has completed examinations of years 2020 and prior. With few exceptions, we are no longer subject to state and local or non-U.S. income tax examinations by tax authorities for years before 2019.
Reconciliation of Gross Unrecognized Tax Benefits (millions) | 2025 | 2024 | 2023 | ||||||||
| Balance at beginning of period | $ | 433 | $ | 352 | $ | 233 | |||||
| Additions based on tax positions related to the current year | 36 | 118 | 128 | ||||||||
| Additions for tax positions of prior years | 4 | 22 | 8 | ||||||||
| Reductions for tax positions of prior years | (36) | (36) | (13) | ||||||||
| Settlements | (1) | (23) | (4) | ||||||||
| Balance at end of period | $ | 436 | $ | 433 | $ | 352 | |||||
If we were to prevail on all unrecognized tax benefits recorded, the amount that would benefit the effective tax rate was $226 million, $206 million, and $161 million as of January 31, 2026, February 1, 2025, and February 3, 2024, respectively. In addition, the reversal of accrued interest and penalties would also benefit the effective tax rate. Interest and penalties associated with unrecognized tax benefits are recorded within income tax expense. During 2025, 2024, and 2023, we recorded expense from accrued interest and penalties of $12 million, $13 million, and $6 million, respectively. As of January 31, 2026, February 1, 2025, and February 3, 2024, total accrued interest and penalties were $32 million, $21 million, and $14 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 11, 2026 | Showing above |
| 2025 | Mar 12, 2025 | |
| 2024 | Mar 13, 2024 | |
| 2023 | Mar 8, 2023 | |
| 2022 | Mar 9, 2022 | |
| 2021 | Mar 10, 2021 | |
| 2020 | Mar 11, 2020 | |
| 2019 | Mar 13, 2019 | |
| 2018 | Mar 14, 2018 | |
| 2017 | Mar 8, 2017 | |
| 2016 | Mar 11, 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.