INCOME TAXES

Prior to the Reorganization Transactions, we were organized as Delaware limited liability companies and Delaware limited partnerships and were treated as flow-through entities for U.S. federal income tax purposes. Subsequent to the Reorganization Transactions, we are subject to U.S. federal income and state tax on our allocable share of any taxable income of TWFG Holding’s income (loss) before provision for income taxes consisted of the following (in thousands):


	Years Ended December 31,
	2025		2024
Domestic	$	44,406	$	29,970
Foreign	39		117
Income before provision for income tax	$	44,445	$	30,087

The components of the provision for income taxes is as follows (in thousands):


	Years Ended December 31,
	2025		2024
Current expense (benefit):
Federal	$	2,538	$	1,090
State	749		382
Foreign	(8)		23
Total current expense (benefit):	$	3,279	$	1,495

Deferred expense (benefit):
Federal	—		—
State	—		—
Foreign	—		—
Total deferred expense (benefit):	$	—	$	—

Total income tax expense:	$	3,279	$	1,495

The reconciliation of the Company’s statutory tax rate and effective tax rate is as follows (in thousands):


	Years Ended December 31,
	2025				2024
	Amount		Percent		Amount		Percent
Pretax income	$	44,445			$	30,087

U.S. federal statutory tax rate	9,333		21.0	%	6,318		21.0	%
State and local income taxes, net of federal benefit	713		1.6	%	354		1.1	%
Foreign tax effects:
Foreign activity	(16)		—	%	(1)		—	%



Tax credits:
Change in valuation allowance	270		0.6	%	273		1.0	%
Nontaxable or nondeductible items:
Partnership income	(7,031)		(15.8)	%	(5,450)		(18.1)	%
Other	10		—	%	1		—	%



Total	$	3,279	7.4	%	$	1,495	5.0	%

The Company’s effective tax rate includes the effects of state and local income taxes, net of the federal income tax benefit, which is primarily attributable to Texas and California, where the Company has significant business activities. Texas and California have higher effective tax rates compared to other jurisdictions where the Company operates, and together, account for more than half of the Company’s total state tax expense.

The components of the Company’s deferred tax assets and liabilities are as follows (in thousands):


	Years Ended December 31,
	2025		2024
Deferred tax assets:
Outside Basis in TWFG Holding	$	32,136	$	31,481
Total deferred tax assets before valuation allowance	32,136		31,481
Valuation allowance	(32,136)		(31,481)
Net deferred tax assets (liability)	$	—	$	—

The future realization of the tax benefits from existing temporary differences and tax attributes ultimately depends on the existence of sufficient taxable income. The Company assesses the realizability of its deferred tax assets at each balance sheet date. In assessing the realization of its deferred tax assets, the Company considers whether it is

more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considers the projected future taxable income, expected reversal of existing deferred tax liabilities, and tax planning strategies in making this assessment. After consideration of all available evidence, both positive and negative, the Company determined that it is not more likely than not that its net deferred tax assets will be realized in the foreseeable future. As a result, the Company has recorded a full valuation allowance as of December 31, 2025 and December 31, 2024.

The Company does not provide for U.S. Federal, state, and applicable foreign income and withholding taxes on the financial reporting basis over the tax basis of its foreign subsidiary investment because the Company has the intention and ability to indefinitely reinvest the undistributed earnings of its foreign subsidiary. As a result, deferred taxes have not been recorded for the outside basis differences in its foreign subsidiary as of December 31, 2025 to the extent such differences are expected to result in future taxable income upon repatriation. The Company reviews its ability and intentions to indefinitely reinvest its foreign earnings at each balance sheet.

The Company records uncertain tax positions as liabilities in accordance with ASC 740-10 and adjusts these liabilities when judgment changes as a result of the evaluation of new information not previously available. Since there is complexity in some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. The calculation and assessment of the Company's income tax exposures generally involves the uncertainties in the application of complex tax laws and regulations for federal, state, and foreign jurisdictions. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon local tax examination including resolutions of any related appeals or litigation on the basis of the technical merits.

The Company files income tax returns in the U.S. and Philippines which are the Company's major jurisdictions where it is subject to tax examination by local tax authorities. The Company is not currently under examination for income taxes, and is not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by local tax authorities to the extent utilized in a future period. The statute of limitations for the Company has expired for tax years prior to December 31, 2022.

As of December 31, 2025 and 2024, we did not have any uncertain tax positions.

The following summarizes the Company’s income taxes paid (net of refunds received) for the years presented below (in thousands):


	Years Ended December 31,
	2025		2024
Federal	$	2,777	$	—
State	489		—
Foreign	2		$	—
Total	$	3,268	$	—

The following summarizes the jurisdictions that exceed 5% of the Company’s total income taxes paid (net of refunds) for the years presented below (in thousands):


	Years Ended December 31,
	2025		2024
State
California	$	227	*
Texas	$	218	*

*Jurisdiction below the threshold for the period presented

Historical Timeline

Fiscal Year	Filed
2025	Mar 10, 2026	Showing above
2024	Mar 27, 2025

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.

TWFG, Inc. Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures