Warby Parker Inc.WRBY
Warby Parker Inc. Income Taxes Disclosure
Income Taxes
Income (loss) before income taxes consists of the following:
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 2,876 | $ | (19,960) | $ | (63,211) | |||||||||||
| Foreign | 167 | 445 | 447 | ||||||||||||||
| Income (loss) before income taxes | $ | 3,043 | $ | (19,515) | $ | (62,764) | |||||||||||
The provision for income taxes consists of the following:
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 1,310 | 739 | 362 | ||||||||||||||
| Foreign | 92 | 136 | 71 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | — | — | — | ||||||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
| Total provision for income taxes | $ | 1,402 | $ | 875 | $ | 433 | |||||||||||
The Company recorded a total provision for income taxes of $1.4 million, $0.9 million, and $0.4 million for the years ended December 31, 2025, 2024, and 2023 respectively.
A summary reconciliation of the effective tax rate by amount and percent is as follows:
| December 31, 2025 | |||||||||||
| $ | % | ||||||||||
| U.S. federal statutory rate | $ | 639 | 21.0 | % | |||||||
State income taxes, net of federal income tax effect(1) | 1,635 | 53.8 | % | ||||||||
| Foreign tax effects | |||||||||||
| Canada | 36 | 1.2 | % | ||||||||
| Nontaxable or non-deductible items | |||||||||||
| Non-deductible stock-based compensation | 4,629 | 152.1 | % | ||||||||
| Non-deductible meals, transportation, and entertainment | 407 | 13.4 | % | ||||||||
| Other | (5) | (0.2) | % | ||||||||
| Change in valuation allowance | (5,939) | (195.2) | % | ||||||||
| Effective tax rate | $ | 1,402 | 46.1 | % | |||||||
__________________
(1)The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Texas, New York, Pennsylvania, and Illinois for 2025.
The Company's effective tax rate of 46.1% for the year ended December 31, 2025 differed from the statutory rate primarily due to non-deductible stock based compensation offset by a change in valuation allowance.
A summary reconciliation of the effective tax rate is as follows:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| Non-deductible stock-based compensation | (30.4) | (20.1) | |||||||||
| Change in valuation allowance | 4.5 | 2.3 | |||||||||
| Other | 0.4 | (3.9) | |||||||||
| Effective tax rate | (4.5) | % | (0.7) | % | |||||||
The Company’s effective tax rate of (4.5)% as of December 31, 2024 and (0.7)% as of December 31, 2023 differed from the statutory rate primarily due to non-deductible stock based compensation offset by a change in valuation allowance.
A summary of income taxes paid (net of refunds) for the year ended December 31, 2025 is as follows:
| December 31, 2025 | |||||
| Federal | $ | — | |||
| State | |||||
| California | 227 | ||||
| Texas | 155 | ||||
| Other | 283 | ||||
| Total state | 665 | ||||
| Foreign | |||||
| Canada | 111 | ||||
| Total foreign | 111 | ||||
| Total cash paid during the period for income taxes | $ | 776 | |||
Deferred income taxes, included in other assets on the consolidated balance sheets, reflects the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The approximate tax effect of the significant components of the Company’s deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Inventory | $ | 5,141 | $ | 2,572 | |||||||
| Charitable contribution carryforward | 5,216 | 12,289 | |||||||||
| Stock-based compensation | 1,574 | 2,573 | |||||||||
| Net operating loss carryforward | 50,718 | 46,470 | |||||||||
| Lease liabilities | 65,451 | 64,021 | |||||||||
| Other | 4,172 | 6,818 | |||||||||
| Total deferred tax assets | 132,272 | 134,743 | |||||||||
| Valuation allowance | (56,291) | (68,504) | |||||||||
| Net deferred tax assets | 75,981 | 66,239 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment, net | (30,833) | (20,533) | |||||||||
| Right-of-use lease assets | (45,148) | (45,706) | |||||||||
| Total deferred tax liabilities | (75,981) | (66,239) | |||||||||
Deferred tax assets, net | $ | — | $ | — | |||||||
As of December 31, 2025, the Company had a net operating loss carryforward (“NOL”) of $299.9 million which represents the impact of current and historic operating losses available to reduce future income taxes. Federal NOLs of $68.9 million and state NOLs of $80.2 million will begin to expire at various points beginning in 2033, however, $150.8 million of federal NOLs are available for indefinite use.
As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $56.3 million and $68.5 million, respectively, against its net deferred tax assets because it cannot be reasonably assured that deductible temporary differences and NOLs can be realized through future taxable income due to the Company’s history of losses. The Company will continue to assess the realizability of the deferred tax assets in each of the applicable jurisdictions going forward and assess the valuation allowance accordingly.
As of December 31, 2025 and 2024, there were no uncertain tax positions. As of December 31, 2025 and 2024, the Company was subject to federal, state, and provincial income taxes in the United States and Canada. As a result of the Company’s NOL carryforwards, substantially all of the tax years, beginning with December 31, 2011, remain open and subject to examination. It is the Company’s policy to record interest and penalties as a component of income tax expense. No interest or penalties were recognized in the consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2025, 2024, or 2023.
In 2025, the Company calculated the impact of the changes to bonus depreciation and research and development expenditures, as provided by OBBBA. In 2024 and 2023, the Company calculated the impact of the mandatory capitalization and amortization of research and development expenditures, as required by the Tax Act. For the periods ending December 31, 2025, 2024, and 2023, these changes did not have a material impact on the Company’s consolidated financial statements.
As a result of the Tax Act, the Company's undistributed foreign earnings through 2017 were deemed to have been repatriated to the United States. The Company's intent is to indefinitely reinvest its foreign earnings generated outside of the United States starting in 2018. The Company's non-U.S. subsidiary will use any cash generated to finance foreign operations. If the Company decides at a later date to repatriate these earnings, the Company could be subject to additional income taxes. The income taxes applicable to such earnings and other outside basis differences are not readily determinable or practicable to calculate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 18, 2022 | |
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.