Toll Brothers, Inc.TOL
Toll Brothers, Inc. Income Taxes Disclosure
Income Taxes
The following table provides a reconciliation of our effective tax rate from the federal statutory tax rate for the fiscal years ended October 31, 2025, 2024, and 2023 ($ amounts in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| $ | %* | $ | %* | $ | %* | ||||||||||||||||||||||||||||||
| Federal tax provision at statutory rate | 376,188 | 21.0 | 437,984 | 21.0 | 386,898 | 21.0 | |||||||||||||||||||||||||||||
| State tax provision, net of federal benefit | 85,649 | 4.8 | 103,880 | 5.0 | 90,698 | 4.9 | |||||||||||||||||||||||||||||
| Other permanent differences | 56 | — | 2,737 | 0.1 | (2,782) | (0.2) | |||||||||||||||||||||||||||||
| Reversal of accrual for uncertain tax positions | (1,748) | (0.1) | (2,132) | (0.1) | (621) | — | |||||||||||||||||||||||||||||
Accrued interest on anticipated tax assessments | 1,292 | 0.1 | 1,418 | 0.1 | 403 | — | |||||||||||||||||||||||||||||
| Increase in unrecognized tax benefits | 2,598 | 0.1 | 2,556 | 0.1 | 2,209 | 0.1 | |||||||||||||||||||||||||||||
| Excess stock compensation benefit | (15,196) | (0.8) | (17,546) | (0.8) | (7,320) | (0.4) | |||||||||||||||||||||||||||||
| Energy tax credits | — | — | (68) | — | (2,348) | (0.1) | |||||||||||||||||||||||||||||
| Other | (3,954) | (0.2) | (14,384) | (0.7) | 3,163 | 0.2 | |||||||||||||||||||||||||||||
| Income tax provision* | 444,885 | 24.8 | 514,445 | 24.7 | 470,300 | 25.5 | |||||||||||||||||||||||||||||
* Due to rounding, percentages may not add
We are subject to state tax in the jurisdictions in which we operate. We estimate our state tax liability based upon the individual taxing authorities’ regulations, estimates of income by taxing jurisdiction, and our ability to utilize certain tax-saving strategies. Based on our estimate of the allocation of income or loss among the various taxing jurisdictions and changes in tax regulations and their impact on our tax strategies, we estimated that our rate for state income taxes, before federal benefit, will be 6.1% in fiscal 2025. Our state income tax rate, before federal benefit, was 6.3% and 6.2% in fiscal 2024 and 2023, respectively.
The following table provides information regarding the provision (benefit) for income taxes for each of the fiscal years ended October 31, 2025, 2024, and 2023 (amounts in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 372,664 | $ | 425,445 | $ | 385,650 | |||||||||||
| State | 72,221 | 89,000 | 84,650 | ||||||||||||||
| $ | 444,885 | $ | 514,445 | $ | 470,300 | ||||||||||||
| Current | $ | 358,146 | $ | 594,775 | $ | 433,837 | |||||||||||
| Deferred | 86,739 | (80,330) | 36,463 | ||||||||||||||
| $ | 444,885 | $ | 514,445 | $ | 470,300 | ||||||||||||
The components of income taxes payable at October 31, 2025 and 2024 are set forth below (amounts in thousands):
| 2025 | 2024 | ||||||||||
| Current | $ | 16,766 | $ | 37,905 | |||||||
| Deferred | 160,350 | 76,642 | |||||||||
| $ | 177,116 | $ | 114,547 | ||||||||
The following table provides a reconciliation of the change in the unrecognized tax benefits for the years ended October 31, 2025, 2024, and 2023 (amounts in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance, beginning of year | $ | 20,029 | $ | 10,512 | $ | 4,922 | |||||||||||
| Increase in benefit as a result of tax positions taken in prior years | 1,631 | 8,650 | 3,633 | ||||||||||||||
| Increase in benefit as a result of tax positions taken in current year | 3,293 | 3,142 | 2,733 | ||||||||||||||
| Decrease in benefit as a result of settlements | — | (1,782) | — | ||||||||||||||
| Decrease in benefit as a result of lapse of statute of limitations | (2,201) | (493) | (776) | ||||||||||||||
| Balance, end of year | $ | 22,752 | $ | 20,029 | $ | 10,512 | |||||||||||
The statute of limitations has expired on our federal tax returns for fiscal years through 2021. The statute of limitations for our major state tax jurisdictions remains open for examination for fiscal year 2020 and subsequent years.
Our unrecognized tax benefits are included in the current portion of “Income taxes payable” on our Consolidated Balance Sheets. If these unrecognized tax benefits reverse in the future, they would have a beneficial impact on our effective tax rate at that time. During the next 12 months, it is reasonably possible that the amount of unrecognized tax benefits will change, but we are not able to provide a range of such change. The anticipated changes will be principally due to the expiration of tax statutes, settlements with taxing jurisdictions, increases due to new tax positions taken, and the accrual of estimated interest and penalties.
The amounts accrued for interest and penalties are included in the current portion of “Income taxes payable” on our Consolidated Balance Sheets. The following table provides information as to the amounts recognized in our tax provision, before reduction for applicable taxes and reversal of previously accrued interest and penalties, of potential interest and penalties in the fiscal years ended October 31, 2025, 2024, and 2023, and the amounts accrued for potential interest and penalties at October 31, 2025 and 2024 (amounts in thousands):
| Expense recognized in the Consolidated Statements of Operations and Comprehensive Income | |||||
| Fiscal year | |||||
| 2025 | $ | 1,636 | |||
| 2024 | $ | 785 | |||
| 2023 | $ | 332 | |||
| Accrued at: | |||||
| October 31, 2025 | $ | 3,882 | |||
| October 31, 2024 | $ | 1,728 | |||
The components of net deferred tax assets and liabilities at October 31, 2025 and 2024 are set forth below (amounts in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued expenses | $ | 67,787 | $ | 61,353 | |||||||
| Impairment charges | 26,132 | 23,074 | |||||||||
| Inventory valuation differences | 21,440 | 44,307 | |||||||||
| Stock-based compensation expense | 12,384 | 11,966 | |||||||||
| Amounts related to unrecognized tax benefits | 4,712 | 4,130 | |||||||||
| State tax, net operating loss carryforwards | 7,193 | 4,285 | |||||||||
| Other | 2,607 | 117 | |||||||||
| Total assets | 142,255 | 149,232 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Capitalized interest | 20,478 | 20,634 | |||||||||
| Deferred income | 245,646 | 171,954 | |||||||||
| Expenses taken for tax purposes not for book | 3,766 | 2,304 | |||||||||
| Depreciation | 10,848 | 13,681 | |||||||||
| Deferred marketing | 21,867 | 17,301 | |||||||||
| Total liabilities | 302,605 | 225,874 | |||||||||
| Net deferred tax liabilities | $ | (160,350) | $ | (76,642) | |||||||
In accordance with GAAP, we assess whether a valuation allowance should be established based on our determination of whether it is more-likely-than-not that some portion or all of the deferred tax assets would not be realized. At October 31, 2025 and 2024, we determined that it was more-likely-than-not that our deferred tax assets would be realized. Accordingly, at October 31, 2025 and 2024, we did not have valuation allowances recorded against our federal or state deferred tax assets.
We file tax returns in the various states in which we do business. Each state has its own statutes regarding the use of tax loss carryforwards. Some of the states in which we do business do not allow for the carryforward of losses, while others allow for carryforwards ranging from five years to an indefinite carryforward period.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 19, 2025 | Showing above |
| 2024 | Dec 20, 2024 | |
| 2023 | Dec 21, 2023 | |
| 2022 | Dec 19, 2022 | |
| 2021 | Dec 17, 2021 | |
| 2020 | Dec 22, 2020 | |
| 2019 | Dec 26, 2019 | |
| 2018 | Dec 20, 2018 | |
| 2017 | Dec 21, 2017 | |
| 2016 | Dec 23, 2016 | |
| 2015 | Dec 21, 2015 | |
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.