INCOME TAXES

12 Months Ended

Dec. 31, 2025

INCOME TAXES

INCOME TAXES

11. INCOME TAXES

For 2025, 2024, and 2023, UDR believes that we have complied with the REIT requirements specified in the Code. As such, the REIT would generally not be subject to federal income taxes.

For income tax purposes, distributions paid to common stockholders may consist of ordinary income, qualified dividends, capital gains, unrecaptured section 1250 gains, return of capital, or a combination thereof. Distributions that exceed our current and accumulated earnings and profits constitute a return of capital rather than taxable income and reduce the stockholder’s basis in their common shares. To the extent that a distribution exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common shares, it generally will be treated as a gain

from the sale or exchange of that stockholder’s common shares. Taxable distributions paid per common share were taxable as follows for the years ended December 31, 2025, 2024 and 2023 (unaudited):

	Year Ended December 31,
	2025		2024		2023
Ordinary income	$	1.4244	$	1.5935	$	1.4384
Qualified ordinary income		0.0001		0.0001		0.0001
Long-term capital gain		0.1771		0.0458		0.1697
Unrecaptured section 1250 gain		0.1134		0.0556		0.0318
Total	$	1.7150	$	1.6950	$	1.6400

We have a TRS that is subject to federal and state income taxes. A TRS is a C-corporation which has not elected REIT status and as such is subject to United States federal and state income tax. The components of the provision for income taxes are as follows for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands):

	Year Ended December 31,
	2025		2024		2023
Income tax (benefit)/provision
Current
Federal	$	210	$	314	$	69
State		940		1,192		2,036
Total current		1,150		1,506		2,105
Deferred
Federal		(252)		(103)		26
State		(15)		(476)		23
Investment tax credit		(48)		(48)		(48)
Total deferred		(315)		(627)		1
Total income tax (benefit)/provision	$	835	$	879	$	2,106

Deferred income taxes are provided for the change in temporary differences between the basis of certain assets and liabilities for financial reporting purposes and income tax reporting purposes. The expected future tax rates are based upon enacted tax laws. The components of our TRS deferred tax assets and liabilities are recorded in Accounts payable, accrued expenses and other liabilities on the Consolidated Balance Sheets, and are as follows for the years ended December 31, 2025, 2024, and 2023 (dollars in thousands):

	Year Ended December 31,
	2025		2024		2023
Deferred tax assets:
Federal and state tax attributes	$	31	$	55	$	28
Other		401		142		153
Total deferred tax assets		432		197		181
Valuation allowance		(27)		(27)		(27)
Net deferred tax assets		405		170		154
Deferred tax liabilities:
Book/tax depreciation and basis		(787)		(878)		(881)
Other		(132)		(73)		(76)
Total deferred tax liabilities		(919)		(951)		(957)
Net deferred tax assets/(liabilities)	$	(514)	$	(781)	$	(803)

Income tax provision/(benefit), net from our TRS differed from the amounts computed by applying the U.S. statutory rate of 21% to pretax income/(loss) for the years ended December 31, 2025, 2024, and 2023 as follows (dollars in thousands):

	Year Ended December 31,
	2025		2024		2023
Income tax provision/(benefit)
U.S. federal income tax provision/(benefit)	$	(40)	$	251	$	105
State income tax provision		923		1,233		2,054
Solar credit amortization		(48)		(48)		(48)
ITC basis adjustment		—		(557)		—
Valuation allowance		—		—		(5)
Total income tax provision/(benefit)	$	835	$	879	$	2,106

The Company’s Tax benefit/(provision), net was $(0.8) million, $(0.9) million and $(2.1) million for the years ended December 31, 2025, 2024 and 2023, respectively. The decrease of $0.1 million was primarily attributable to a decrease in state taxes for the tax year ended December 31, 2025. GAAP defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The financial statements reflect expected future tax consequences of income tax positions presuming the taxing authorities’ full knowledge of the tax position and all relevant facts, but without considering time values. GAAP also provides guidance on derecognition, classification, interest and penalties, accounting for interim periods, disclosure and transition.

The Company evaluates our tax position using a two-step process. First, we determine whether a tax position is more likely than not (greater than 50 percent probability) to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company will then determine the amount of benefit to recognize and record the amount of the benefit that is more likely than not to be realized upon ultimate settlement. As of December 31, 2025 and 2024, UDR has no material unrecognized income tax benefits/(provisions), net.

The Company files income tax returns in federal and various state and local jurisdictions. The tax years 2022 through 2025 remain open to examination by the major taxing jurisdictions to which the Company is subject.