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Income Taxes | 12 Months Ended
--- | ---
Sep. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income Tax Expense The components of the Company’s income tax expense are as follows:
| Year Ended September 30,
| 2025 |  | 2024 |  | 2023
| (In millions)
Current tax expense: |  |  |  |  |
Federal | $ | 821.4 |  |  | $ | 1,200.9 |  |  | $ | 1,293.0 |
State | 174.4 |  |  | 258.8 |  |  | 272.4 |
| 995.8 |  |  | 1,459.7 |  |  | 1,565.4 |
Deferred tax expense (benefit): |  |  |  |  |
Federal | 104.8 |  |  | 15.5 |  |  | (39.0) |
State | 18.4 |  |  | 3.5 |  |  | (6.9) |
| 123.2 |  |  | 19.0 |  |  | (45.9) |
Total income tax expense | $ | 1,119.0 |  |  | $ | 1,478.7 |  |  | $ | 1,519.5 |
The Company’s effective tax rate was 23.6%, 23.5% and 24.1% in fiscal 2025, 2024 and 2023, respectively. The effective tax rates for all years include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient home tax credits. Reconciliation of Expected Income Tax Expense Differences between income tax expense and tax computed by applying the federal statutory rate of 21% to income before income taxes during each year is due to the following:
| Year Ended September 30,
| 2025 |  | 2024 |  | 2023
| (In millions)
Income taxes at federal statutory rate | $ | 995.4 |  |  | $ | 1,319.8 |  |  | $ | 1,326.1 |
Increase (decrease) in tax resulting from: |  |  |  |  |
State income taxes, net of federal benefit | 154.1 |  |  | 205.8 |  |  | 208.1 |
Valuation allowance | (0.3) |  |  | 0.1 |  |  | (3.1) |
Tax credits | (39.5) |  |  | (70.4) |  |  | (44.4) |
Excess tax benefit from stock-based compensation | (16.0) |  |  | (42.7) |  |  | (25.6) |
Tax contingencies | — |  |  | (1.4) |  |  | (1.5) |
Other | 25.3 |  |  | 67.5 |  |  | 59.9 |
Total income tax expense | $ | 1,119.0 |  |  | $ | 1,478.7 |  |  | $ | 1,519.5 |
Deferred Income Taxes Deferred tax assets and liabilities reflect the tax consequences of temporary differences between the financial statement bases of assets and liabilities and their tax bases, tax losses and credit carryforwards. Components of deferred income taxes are summarized as follows:
| September 30,
| 2025 |  | 2024
| (In millions)
Deferred tax assets: |  |  |
Inventory costs | $ | 39.6 |  |  | $ | 87.3 |
Inventory impairments | 13.4 |  |  | 8.7 |
Warranty and construction defect costs | 356.2 |  |  | 316.2 |
Net operating loss carryforwards | 36.5 |  |  | 38.9 |
Tax credit carryforwards | 22.1 |  |  | 6.9 |
Incentive compensation plans | 105.0 |  |  | 93.7 |
Other | 21.2 |  |  | 14.0 |
Total deferred tax assets | 594.0 |  |  | 565.7 |
Valuation allowance | (14.6) |  |  | (14.9) |
Total deferred tax assets, net of valuation allowance | 579.4 |  |  | 550.8 |
Deferred tax liabilities: |  |  |
Deferral of profit on home closings | 327.6 |  |  | 226.4 |
Depreciation of fixed assets | 76.7 |  |  | 44.8 |
Deferral of income | 31.9 |  |  | 29.3 |
Undistributed earnings of subsidiary | 90.7 |  |  | 77.4 |
Other | 8.0 |  |  | 5.4 |
Total deferred tax liabilities | 534.9 |  |  | 383.3 |
Deferred income taxes, net | $ | 44.5 |  |  | $ | 167.5 |
The Company has $25.4 million of tax benefits for a federal net operating loss (NOL) carryforward. The utilization of the federal NOL is subject to IRC Section 382 limitations; however, it is expected that all of the federal NOL will be utilized within the carryforward period. D.R. Horton has $10.4 million of tax benefits for state NOL carryforwards that expire at various times depending on the tax jurisdiction. Of this amount, $5.5 million of the tax benefits expire over the next ten years and the remaining $4.9 million expire from fiscal years 2036 to 2045. Forestar has $0.7 million of tax benefits for state NOL carryforwards that expire at various times depending on the tax jurisdiction. Forestar has $16.5 million of federal corporate alternative minimum tax credit carryforwards that do not expire. The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company’s consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation of the Company’s deferred tax assets. Valuation Allowance The Company has a valuation allowance of $14.6 million and $14.9 million at September 30, 2025 and 2024, respectively, related to deferred tax assets for state NOL and tax credit carryforwards that are expected to expire before being realized. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to the remaining state NOL and tax credit carryforwards. Any reversal of the valuation allowance in future periods will impact the Company’s effective tax rate. Unrecognized Tax Benefits Unrecognized tax benefits are the differences between tax positions taken or expected to be taken in a tax return and the benefits recognized in the financial statements. The Company had no unrecognized tax benefits and no accrued interest or penalties related to unrecognized tax benefits at September 30, 2025 or 2024. The Company classifies interest expense and penalties on income taxes as income tax expense. Regulations and Legislation D.R. Horton is subject to federal income tax and state income tax in multiple jurisdictions. The statute of limitations for the majority of D.R. Horton’s tax jurisdictions remains open for examination for fiscal years 2022 through 2025. D.R. Horton is not currently under audit for federal income taxes. D.R. Horton is under audit by various states; however, the Company is not aware of any significant findings by the state taxing authorities. Forestar is subject to federal income tax and state income tax in multiple jurisdictions. The statute of limitations for the majority of Forestar’s tax jurisdictions remains open for examination for fiscal years 2022 through 2025. Forestar is not currently under audit for federal income taxes. Forestar is under audit by various states; however, Forestar is not aware of any significant findings by the state taxing authorities. On July 4, 2025, the One Big Beautiful Bill Act was signed into law (the new law). The new law terminates the energy efficient home tax credit for homes closing after June 30, 2026 and enacts certain other tax provisions that will impact the Company’s financial statements. The Company’s tax benefits related to the energy efficient home tax credit were $39.5 million and $70.4 million in fiscal 2025 and 2024, respectively. None of the other tax provisions enacted by the new law have a significant impact on the Company’s financial statements.

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