Income Taxes

12 Months Ended

Jan. 31, 2026

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Reconciliation of the federal statutory income tax rate to the effective tax rate was as follows ($ in millions):

	2026
	Amount		Percent
U.S. federal income tax at the statutory rate	$	295	21.0	%
State and local income taxes, net of federal income tax effect(1)	38		2.7	%
Foreign tax effects:
China - Statutory tax rate differential	(20)		(1.4)	%
Other foreign jurisdictions	8		0.6	%
Effect of cross-border tax laws, net of related foreign tax credits:
Subpart F inclusion	19		1.3	%
Other	(1)		(0.1)	%
Nontaxable or nondeductible items:
Goodwill impairment	25		1.8	%
Other	11		0.8	%
Other adjustments:
Exit of a component of Best Buy Health business	(27)		(1.9)	%
Other	(11)		(0.8)	%
Effective income tax rate	$	337	24.0	%

(1)State and local income taxes in California, Oregon, Texas, New York and Illinois contributed to the majority (greater than 50%) of the tax effect in this category.

Reconciliations of prior year federal statutory income tax rate to the effective tax rate were as follows ($ in millions):

	2025			2024
Federal income tax at the statutory rate	$	272		$	340
State income taxes, net of federal benefit	52			57
Change in unrecognized tax benefits	(5)			(6)
Expense (benefit) from foreign operations	3			(5)
Tax credits	(23)			(13)
Goodwill impairments (non-deductible)	63			-
Other	10			8
Income tax expense	$	372		$	381
Effective income tax rate	28.7		%	23.5		%

Earnings before income tax expense and equity in income of affiliates by jurisdiction were as follows ($ in millions):

	2026		2025		2024
United States	$	1,223	$	1,095	$	1,389
Foreign	181		200		232
Earnings before income tax expense and equity in income of affiliates	$	1,404	$	1,295	$	1,621

Income tax expense (benefit) was comprised of the following ($ in millions):

	2026		2025		2024
Current:
Federal	$	207	$	341	$	452
State	42		67		104
Foreign	28		23		39
	277		431		595
Deferred:
Federal	55		(55)		(177)
State	4		(7)		(37)
Foreign	1		3		-
	60		(59)		(214)
Total income tax expense	$	337	$	372	$	381

Deferred taxes are the result of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred tax assets and liabilities were comprised of the following ($ in millions):

	January 31, 2026		February 1, 2025
Deferred revenue	$	119	$	125
Compensation and benefits	70		75
Stock-based compensation	30		29
Other accrued expenses	35		46
Operating lease liabilities	750		758
Loss and credit carryforwards	140		163
Property and equipment	36		57
Other	50		48
Total deferred tax assets	1,230		1,301
Valuation allowance	(143)		(172)
Total deferred tax assets after valuation allowance	1,087		1,129
Inventory	(96)		(92)
Operating lease assets	(720)		(734)
Goodwill and intangible assets	(86)		(61)
Other	(21)		(19)
Total deferred tax liabilities	(923)		(906)
Net deferred tax assets	$	164	$	223

Net deferred tax assets were included in Other assets on our Consolidated Balance Sheets as of January 31, 2026, and February 1, 2025.

As of January 31, 2026, we had deferred tax assets for net operating loss carryforwards from international operations of $93 million, of which $31 million will expire in various years through 2043 and the remaining amounts have no expiration; U.S. federal foreign tax credit carryforwards of $29 million, which will expire between 2027 and 2036; state credit carryforwards of $1 million, which will expire between 2027 and 2045; state net operating loss carryforwards of $8 million, which will expire between 2027 and 2046; international credit carryforwards of $1 million, which have no expiration; and international capital loss carryforwards of $8 million, which have no expiration.

As of January 31, 2026, a valuation allowance of $143 million had been established, of which $29 million is against U.S. federal foreign tax credit carryforwards; $13 million is against international, federal and state capital loss carryforwards; $99 million is against international and state net operating loss carryforwards and $2 million is against international and state credit carryforwards. The decrease in valuation allowance in fiscal 2026 was primarily due to disposals relating to certain international and state net operating loss carryforwards and certain other foreign deferred tax assets.

Reconciliations of changes in unrecognized tax benefits were as follows ($ in millions):

	2026		2025		2024
Balances at beginning of period	$	145	$	140	$	163
Gross increases related to prior period tax positions	2		13		10
Gross decreases related to prior period tax positions	(6)		(10)		(11)
Gross increases related to current period tax positions	17		20		20
Settlements with taxing authorities	(5)		1		(3)
Lapse of statute of limitations	(18)		(19)		(39)
Balances at end of period	$	135	$	145	$	140

Unrecognized tax benefits of $105 million, $116 million and $121 million as of January 31, 2026, February 1, 2025, and February 3, 2024, respectively, would favorably impact our effective income tax rate if recognized.

We recognize interest and penalties (not included in the unrecognized tax benefits above), as well as interest received from favorable tax settlements, as components of income tax expense. Interest expense of $6 million, $1 million and $3 million was recognized in fiscal 2026, fiscal 2025 and fiscal 2024, respectively. As of January 31, 2026, February 1, 2025, and February 3, 2024, we had accrued interest of $50 million, $45 million and $43 million, respectively.

We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal or state and local income tax examinations by taxing authorities for years before fiscal 2020. For certain foreign jurisdictions, however, we remain open for examination of fiscal years back to 2011.

Changes in state, federal and foreign tax laws, as well as the timing and outcome of tax examinations, may impact our tax contingencies. The timing and resolution of these matters is uncertain, and the amounts ultimately paid may differ from our recorded accruals, resulting in a change to our gross unrecognized tax benefits in the period in which the change occurs.

Income taxes paid were as follows ($ in millions):

	January 31, 2026
Federal	$	197
State and local	63
Foreign:
Canada	19
Other	5
Total(1)	$	284

(1)Includes payments for purchased tax credits of $150 million.

Recently Enacted Tax Legislation

On July 4, 2025, the One Big Beautiful Bill Act ("OB3") was signed into law, amending and extending key provisions of the 2017 Tax Cuts and Jobs Act, including, but not limited to, domestic research expensing, 100% bonus depreciation on tangible property and modifications to the international tax framework. The provisions reduced our fiscal 2026 cash tax liability but did not have a material impact on our income tax expense.

On February 18, 2026, the U.S. Treasury and the Internal Revenue Service issued Notice 2026-7, Additional Interim Guidance Regarding the Application of the Corporate Alternative Minimum Tax. We are currently evaluating the financial impact, including assessing how the adjustments allowed under this notice interact with the tax law changes introduced by OB3.