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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2025

As required under the updated guidance, the components of pretax income for the year ended December 31, 2025 included in the Consolidated Statements of Income were as follows:

TABLE 19.1: COMPONENTS OF PRETAX INCOME


(Millions)	2025
Income (loss) from continuing operations before income tax expense (benefit):
U.S.	$	8,302
Non-U.S.	5,493
Total	$	13,795

Components of income tax expense

The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income were as follows:

TABLE 19.2: COMPONENTS OF INCOME TAX EXPENSE


(Millions)	2025		2024		2023
Current income tax expense:
U.S. federal	$	1,735	$	2,368	$	2,455
U.S. state and local	497		494		351
Non-U.S.	1,272		894		662
Total current income tax expense	3,504		3,756		3,468
Deferred income tax (benefit) expense:
U.S. federal	(328)		(797)		(952)
U.S. state and local	(120)		(146)		(139)
Non-U.S.	(95)		(47)		(238)
Total deferred income tax (benefit) expense	(542)		(990)		(1,329)
Total income tax expense	$	2,962	$	2,766	$	2,139

Effective income tax rate reconciliation

A reconciliation of the U.S. federal statutory rate of 21 percent to our actual income tax rate as of December 31, 2025, prepared under the updated guidance was as follows:

TABLE 19.3: RECONCILIATION OF ACTUAL INCOME TAX RATE FOR 2025


	2025
(Millions, except percentages)	$		%
U.S. statutory federal income tax rate	$	2,897	21.0	%
(Decrease) increase in taxes resulting from:
State and local income taxes, net of federal benefit (a)	265		1.9
Foreign tax effects:
Jersey – Statutory tax rate differential	(423)		(3.1)
Jersey – Multinational corporate income tax & other	182		1.3
Other foreign jurisdictions (b)	148		1.1
Effect of cross-border tax laws	(42)		(0.3)
Tax credits	(146)		(1.0)
Changes in valuation allowances	22		0.2
Non-taxable or non-deductible items	(9)		(0.1)
Changes in unrecognized tax benefits	69		0.5
Actual tax rates	$	2,962	21.5	%

(a)State and local income taxes in California, New York, New York City and Florida comprise the majority of the state and local income taxes, net of federal benefit as of December 31, 2025.

(b)In certain jurisdictions outside the United States, we benefit from agreements that temporarily lower our income tax expense. The impact of these agreements was not material to our Consolidated Statements of Income.

A reconciliation of the U.S. federal statutory rate of 21 percent to our actual income tax rate as of December 31, 2024 and 2023 prepared under the prior guidance was as follows:

TABLE 19.4: RECONCILIATION OF ACTUAL INCOME TAX RATE FOR 2024 AND 2023


	2024		2023
U.S. statutory federal income tax rate	21.0	%	21.0	%
(Decrease) increase in taxes resulting from:
Tax credits and tax-exempt income	(0.7)		(0.7)
State and local income taxes, net of federal benefit	2.5		2.4
Non-U.S. subsidiaries’ earnings (a)	(1.0)		(0.8)
Tax settlements and lapse of statute of limitations	(0.5)		(2.0)


Valuation allowances	—		0.1
Other	0.2		0.3
Actual tax rates	21.5	%	20.3	%

(a)In certain jurisdictions outside the United States, we benefit from agreements that temporarily lower our income tax expense. The impact of these agreements was not material to our Consolidated Statements of Income.

Components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities as of December 31, 2025 and 2024 are reflected in the following table:

TABLE 19.5: COMPONENTS OF DEFERRED TAX ASSETS AND LIABILITIES


(Millions)	2025		2024
Deferred tax assets:
Reserves not yet deducted for tax purposes	$	5,529	$	4,950
Employee compensation and benefits	443		343
Net operating loss and tax credit carryforwards	511		464
Capitalized developed software	995		1,084
Other	952		853
Gross deferred tax assets	8,430		7,694
Valuation allowance	(718)		(655)
Deferred tax assets after valuation allowance	7,712		7,039
Deferred tax liabilities:
Intangibles and fixed assets	733		673
Deferred interest	112		113

Other	606		579
Gross deferred tax liabilities	1,451		1,365
Net deferred tax assets	$	6,261	$	5,674

Schedule of Income Taxes Paid

As required under the updated guidance, the income taxes paid (net of refunds received) disaggregated by jurisdictional categories (U.S. federal, U.S. state and non-U.S.) for the year ended December 31, 2025 were as follows:

TABLE 19.6: INCOME TAXES PAID


(Millions)						2025
Income taxes paid by jurisdiction:
U.S. federal						1,833
U.S. state and local						452
Non-U.S.
Mexico						226
Other						685
Total						3,195

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:

TABLE 19.7: ROLLFORWARD OF UNRECOGNIZED TAX BENEFITS


(Millions)	2025		2024		2023
Balance, January 1	$	1,006	$	875	$	962
Increases:
Current year tax positions	153		161		132
Tax positions related to prior years	46		47		40
Effects of foreign currency translations	13		—		—
Decreases:
Tax positions related to prior years	(12)		(4)		(50)
Settlements with tax authorities	(85)		(39)		(160)
Lapse of statute of limitations	(18)		(21)		(49)
Effects of foreign currency translations	—		(13)		—
Balance, December 31	$	1,102	$	1,006	$	875