VERIZON COMMUNICATIONS INCVZ
VERIZON COMMUNICATIONS INC Income Taxes Disclosure
| Note 12. Taxes | ||
The components of income before provision for income taxes are as follows:
| (dollars in millions) | |||||||||||||||||
| Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | 20,150 | $ | 21,253 | $ | 15,668 | |||||||||||
| Foreign | 2,522 | 1,726 | 1,319 | ||||||||||||||
| Total | $ | 22,672 | $ | 22,979 | $ | 16,987 | |||||||||||
The components of the provision for income taxes are as follows:
| (dollars in millions) | |||||||||||||||||
| Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 1,735 | $ | 3,367 | $ | 2,070 | |||||||||||
| Foreign | 323 | 240 | 219 | ||||||||||||||
| State and local | 666 | 608 | 215 | ||||||||||||||
| Total | 2,724 | 4,215 | 2,504 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 2,115 | 807 | 1,799 | ||||||||||||||
| Foreign | 19 | (4) | 28 | ||||||||||||||
| State and local | 206 | 12 | 561 | ||||||||||||||
| Total | 2,340 | 815 | 2,388 | ||||||||||||||
| Total income tax provision | $ | 5,064 | $ | 5,030 | $ | 4,892 | |||||||||||
The following table shows the principal reasons for the difference between the effective income tax rate and the statutory federal income tax rate:
| (dollars in millions) | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Years Ended December 31, | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 4,761 | 21.0 | % | $ | 4,825 | 21.0 | % | $ | 3,567 | 21.0 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect(1) | 739 | 3.3 | 566 | 2.5 | 664 | 3.9 | ||||||||||||||||||||
| Foreign tax effects | (131) | (0.6) | (68) | (0.3) | (16) | (0.1) | ||||||||||||||||||||
| Effect of cross-border tax laws | 41 | 0.2 | — | — | 18 | 0.1 | ||||||||||||||||||||
| Tax credits | (25) | (0.1) | (27) | (0.1) | (27) | (0.2) | ||||||||||||||||||||
| Changes in valuation allowances | (34) | (0.2) | 15 | 0.1 | — | — | ||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||
| Goodwill impairment | — | — | — | — | 1,149 | 6.8 | ||||||||||||||||||||
| Other | (69) | (0.3) | (116) | (0.5) | (133) | (0.8) | ||||||||||||||||||||
| Changes in unrecognized tax benefits | 19 | 0.1 | 40 | 0.2 | (27) | (0.2) | ||||||||||||||||||||
| Other adjustments | ||||||||||||||||||||||||||
| Federal refund claims | — | — | (17) | (0.1) | (245) | (1.4) | ||||||||||||||||||||
| Other | (237) | (1.1) | (188) | (0.9) | (58) | (0.3) | ||||||||||||||||||||
| Effective income tax rate | $ | 5,064 | 22.3 | % | $ | 5,030 | 21.9 | % | $ | 4,892 | 28.8 | % | ||||||||||||||
(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Illinois, Maryland, Pennsylvania and Virginia for 2025, California, Maryland and Pennsylvania for 2024, California, Georgia, Illinois, Maryland and Virginia for 2023.
The effective income tax rate for 2025 was 22.3% compared to 21.9% for 2024. The increase in the effective income tax rate and provision for income taxes was primarily due to higher tax benefits resulting from the favorable resolution of various income tax matters and a reduction in deferred income taxes due to changes in state apportionment during the prior period.
The effective income tax rate for 2024 was 21.9% compared to 28.8% for 2023. The decrease in the effective income tax rate was primarily due to the Verizon Business Group goodwill impairment charge of $5.8 billion in 2023 that substantially decreased income before income taxes and was not deductible. The increase in the provision for income taxes was primarily due to the increase in income before income taxes in the current period.
The amounts of cash taxes paid by Verizon are as follows:
| (dollars in millions) | |||||||||||||||||
| Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 2,236 | $ | 4,745 | $ | 1,447 | |||||||||||
| State | 977 | 665 | 672 | ||||||||||||||
| Foreign | |||||||||||||||||
| Ireland | 291 | 156 | 143 | ||||||||||||||
| All other foreign | 77 | 66 | 81 | ||||||||||||||
| Income taxes, net of amounts refunded | 3,581 | 5,632 | 2,343 | ||||||||||||||
| Employment taxes | 972 | 992 | 1,016 | ||||||||||||||
| Property and other taxes | 1,915 | 1,836 | 2,007 | ||||||||||||||
| Total | $ | 6,468 | $ | 8,460 | $ | 5,366 | |||||||||||
In 2025 and 2023, the only jurisdiction with cash taxes paid that equaled or exceeded 5% of total income taxes paid was Ireland. In 2024, there were no individual jurisdictions with cash taxes paid that equaled or exceeded 5% of total income taxes paid.
Deferred Tax Assets and Liabilities
Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. Significant components of deferred tax assets and liabilities are as follows:
| (dollars in millions) | |||||||||||
| At December 31, | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Employee benefits | $ | 3,366 | $ | 3,676 | |||||||
| Tax loss, credit, and other carry forwards | 1,423 | 1,719 | |||||||||
| Lease liabilities | 4,909 | 5,138 | |||||||||
| Other - assets | 1,847 | 1,735 | |||||||||
| 11,545 | 12,268 | ||||||||||
| Valuation allowances | (1,161) | (1,399) | |||||||||
| Deferred tax assets | 10,384 | 10,869 | |||||||||
| Deferred tax liabilities | |||||||||||
| Spectrum and other intangible amortization | 30,568 | 29,302 | |||||||||
| Depreciation | 21,136 | 20,424 | |||||||||
| Lease right-of-use assets | 4,568 | 4,822 | |||||||||
| Other - liabilities | 2,694 | 2,904 | |||||||||
| Deferred tax liabilities | 58,966 | 57,452 | |||||||||
| Net deferred tax liability | $ | 48,582 | $ | 46,583 | |||||||
Undistributed earnings of certain foreign subsidiaries continue to be indefinitely invested outside the U.S. The majority of Verizon's cash flow is generated from domestic operations and we are not dependent on foreign cash or earnings to meet our funding requirements, nor do we intend to repatriate these undistributed foreign earnings to fund U.S. operations. Furthermore, a portion of these undistributed earnings represents amounts that legally must be kept in reserve in accordance with certain foreign jurisdictional requirements and are unavailable for distribution or repatriation. As a result, we have not provided U.S. deferred taxes on these undistributed earnings because we intend that they will remain indefinitely reinvested outside of the U.S. and, therefore unavailable for use in funding U.S. operations. Determination of the amount of unrecognized deferred taxes related to these undistributed earnings is not practicable.
At December 31, 2025, we had net after-tax loss, credit, and other carry forwards for income tax purposes of approximately $1.4 billion that relate to federal, state and foreign taxes. Of these net after-tax loss, credit, and other carry forwards, approximately $854 million will expire between 2026 and 2045 and approximately $570 million may be carried forward indefinitely.
During 2025, the valuation allowance decreased by $238 million, primarily related to state income taxes. The $1.2 billion valuation allowance at December 31, 2025 is primarily related to state and foreign taxes.
Unrecognized Tax Benefits
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
| (dollars in millions) | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1, | $ | 2,635 | $ | 2,705 | $ | 2,812 | |||||||||||
| Additions based on tax positions related to the current year | 92 | 91 | 114 | ||||||||||||||
| Additions for tax positions of prior years | 68 | 203 | 185 | ||||||||||||||
| Reductions for tax positions of prior years | (87) | (229) | (154) | ||||||||||||||
| Settlements | (5) | (70) | (50) | ||||||||||||||
| Lapses of statutes of limitations | (56) | (65) | (202) | ||||||||||||||
| Balance at December 31, | $ | 2,647 | $ | 2,635 | $ | 2,705 | |||||||||||
At December 31, 2025, 2024, and 2023 the total unrecognized tax benefits included $2.3 billion, in each respective period, that if recognized, would favorably affect the effective income tax rate.
We recognized the following net after-tax expenses (benefit) related to interest and penalties in the provision for income taxes:
| Years Ended December 31, | (dollars in millions) | ||||
| 2025 | $ | 72 | |||
| 2024 | 55 | ||||
| 2023 | 86 | ||||
The after-tax accruals for the payment of interest and penalties in the consolidated balance sheets are as follows:
| At December 31, | (dollars in millions) | ||||
| 2025 | $ | 751 | |||
| 2024 | 684 | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 12, 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.