v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Earnings Before Income Tax Expense
years ended December 31 (in millions)202520242023
Domestic$(3,540)$(7,743)$(3,475)
Foreign10,137 11,459 9,725 
Total earnings before income tax expense$6,597 $3,716 $6,250 
Income Tax Expense
years ended December 31 (in millions)202520242023
Current
Domestic$1,230 $(331)$3,272 
Foreign1,626 1,210 994 
Total current taxes$2,856 $879 $4,266 
Deferred
Domestic$(61)$(1,303)$(2,324)
Foreign(431)(146)(565)
Total deferred taxes$(492)$(1,449)$(2,889)
Total income tax expense (benefit)$2,364 $(570)$1,377 
Effective Tax Rate Reconciliation
ASU 2023-09 was adopted on a prospective basis for the year ended December 31, 2025, accordingly the following table has been included which reconciles the U.S. federal statutory tax rate and expense to the effective tax rate:
year ended December 31 (dollars in millions, except for percentages)2025
Statutory tax rate$1,385 21.0 %
Foreign tax effects
Puerto Rico
Tax rate differential1,426 21.6 
Impact from industrial development income(2,989)(45.3)
Other (23)(0.3)
Bermuda
Tax rate differential104 1.6 
Valuation allowances286 4.3 
Other(14)(0.2)
Ireland
Tax rate differential(115)(1.7)
Net operating loss utilization101 1.5 
Other(7)(0.1)
Malta
Tax rate differential(118)(1.8)
Deduction on equity(128)(1.9)
Non-deductible items241 3.7 
Other35 0.5 
All other, net94 1.4 
Effect of cross-border tax laws
Global intangible low-taxed income, net of foreign tax credit (FTC)1,114 16.9 
U.S. tax impact of branch accounting, net of FTC(149)(2.3)
Other99 1.5 
Tax credits(142)(2.2)
Unrecognized tax benefits654 9.9 
Change in valuation allowances(94)(1.4)
Non-taxable and non-deductible acquisition costs649 9.8 
All other, net(45)(0.7)
Effective tax rate$2,364 35.8 %
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
years ended December 31 20242023
Statutory tax rate21.0 %21.0 %
Effect of foreign operations7.6 8.0 
U.S. tax credits(5.4)(3.1)
Stock-based compensation (1.2)(1.0)
Non-deductible expenses1.1 0.7 
Tax law changes and related structuring(0.3)(3.8)
Tax audits, settlements and reserves(51.4)(1.1)
Acquisition costs13.4 0.2 
All other, net(0.1)1.1 
Effective tax rate(15.3)%22.0 %
The effective income tax rate fluctuates year to year due to the allocation of the company’s taxable earnings among jurisdictions, as well as certain discrete factors and events in each year, including changes in tax law and business development activities. The effective income tax rates in 2025, 2024 and 2023 differed from the statutory tax rate principally due to the impact of foreign operations with lower income tax rates in locations outside the United States, the U.S. global minimum tax, changes in fair value of contingent consideration, tax audits and settlements, tax credits and incentives in the United States, Puerto Rico and other foreign tax jurisdictions, and business development activities. The effective income tax rate in 2025 was higher than 2024 primarily due to a one-time tax benefit associated with the closing of a three-year U.S. IRS examination in 2024, partially offset by decreases in unrecognized tax benefits, a decrease in the impact of acquisition costs related to certain business development activities and a decrease related to the impact of changes in fair value of contingent consideration. The effective income tax rate in 2024 was lower than 2023 due to the closing of the U.S. IRS examination, partially offset by increases in unrecognized tax benefits pertaining to prior years.
The Tax Cuts and Jobs Act (2017 Act) was signed into law in December 2017, resulting in significant changes to the U.S. corporate tax system, including a one-time transition tax on a mandatory deemed repatriation of earnings of certain foreign subsidiaries that were previously untaxed. The 2017 Act also created a U.S. global minimum tax on certain foreign sourced earnings. The company’s accounting policy for the minimum tax on foreign sourced earnings is to report the tax effects on the basis that the minimum tax will be recognized in tax expense in the year it is incurred as a period expense.
On July 4, 2025, the United States government signed into law the One Big Beautiful Bill Act of 2025 (2025 Act). Included within the 2025 Act are provisions that permanently extend certain expiring provisions of the 2017 Act, modify the international tax framework to reduce the tax rate on certain foreign earned income, restore the tax treatment of expensing for domestic research and development costs and bonus depreciation, and allow for full expensing of qualified production property. In addition, the legislation contains multiple effective dates and transition elections, with certain provisions effective in 2025 and others implemented through 2027. The new legislation had a favorable impact on cash tax payments in the current year.
Income Taxes Paid
ASU 2023-09 was adopted on a prospective basis for the year ended December 31, 2025, accordingly the following table has been included which discloses the amount of income taxes paid (net of refunds) disaggregated by jurisdiction:
year ended December 31 (in millions)2025
Domestic$2,185 
Foreign
Ireland431 
Puerto Rico297 
Other713 
Total foreign1,441 
Income taxes paid$3,626 
As previously disclosed and prior to the adoption of ASU 2023-09, income taxes paid totaled $4.1 billion and $4.7 billion for the years ended December 31, 2024 and 2023.
Deferred Tax Assets and Liabilities
as of December 31 (in millions)20252024
Deferred tax assets
Compensation and employee benefits$74 $215 
Accruals and reserves1,133 1,253 
Chargebacks and rebates1,482 1,354 
Net operating losses and other carryforwards16,022 15,815 
Other2,504 2,222 
Total deferred tax assets21,215 20,859 
Valuation allowances(15,018)(14,823)
Total net deferred tax assets6,197 6,036 
Deferred tax liabilities
Excess of book basis over tax basis of intangible assets(1,530)(1,969)
Excess of book basis over tax basis in investments(322)(302)
Other(630)(718)
Total deferred tax liabilities(2,482)(2,989)
Net deferred tax assets $3,715 $3,047 
The increase in deferred tax assets is primarily due to losses in other comprehensive income related to net investment hedges. The decrease in deferred tax liabilities is due to the amortization and impairment of intangible assets.
The company had valuation allowances of $15.0 billion as of December 31, 2025 and $14.8 billion as of December 31, 2024. These were principally related to foreign and state net operating losses and other credit carryforwards that are not expected to be realized.
As of December 31, 2025, the company had U.S. federal, state and foreign credit carryforwards of $614 million as well as U.S. federal, state and foreign net operating loss carryforwards of $38.4 billion, which will expire at various times through 2045. The company also had foreign loss carryforwards of $35.1 billion that have no expiration.
Unremitted foreign earnings subject to the 2017 Act’s transition tax are not considered indefinitely reinvested. Post-2017 earnings subject to the U.S. minimum tax on foreign sourced earnings or eligible for the 100% foreign dividends received deduction are also not considered indefinitely reinvested earnings. However, the company generally considers instances of outside basis differences in foreign subsidiaries that would incur additional U.S. tax upon reversal (e.g., capital gain distributions) to be permanent in duration. The unrecognized tax liability is not practicable to determine.
Unrecognized Tax Benefits
years ended December 31 (in millions)202520242023
Beginning balance$4,401 $5,762 $5,670 
Increase due to current year tax positions337 173 129 
Increase due to prior year tax positions20 454 109 
Decrease due to prior year tax positions(18)(1,741)(21)
Settlements(222)(284)(86)
Increase due to acquisitions12 82 — 
Lapse of statutes of limitations(25)(45)(39)
Ending balance$4,505 $4,401 $5,762 
If recognized, the net amount of potential tax benefits that would impact the company's effective tax rate is $4.4 billion in 2025 and $4.3 billion in 2024. The "Increase due to current year tax positions" and "Increase due to prior year tax positions" in the table above include amounts related to federal, state and international tax items.
AbbVie recognizes interest and penalties related to income tax matters in income tax expense in the consolidated statements of earnings. AbbVie recognized a gross income tax expense of $315 million in 2025, a gross income tax benefit of $179 million in 2024 and a gross income tax expense of $430 million in 2023 for interest and penalties related to income tax matters. AbbVie had an accrual for the payment of gross interest and penalties of $1.7 billion at December 31, 2025, $1.4 billion at December 31, 2024 and $1.6 billion at December 31, 2023.
The company is routinely audited by the tax authorities in significant jurisdictions and various federal, state and foreign examinations are currently ongoing. All significant federal, state and international tax matters have been concluded for years before 2010. The company believes adequate provision has been made for all income tax uncertainties.