v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company has elected to be taxed as a REIT commencing with its taxable year ended December 31, 2019. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes its REIT taxable income to stockholders and does not engage in prohibited transactions (as further described below). Income tax (benefit) items arise at the Company’s TRS level.

Certain sales by the group consisting of the Company and its subsidiaries may give rise to gain that could be treated as derived from “prohibited transactions” if carried out by the Company directly. Such transactions involve the purchase of residential mortgage loans and the subsequent sale of those mortgage loans or interests therein through the secondary whole loan market or the securitization markets. The Company has designated AOMR TRS to conduct such transactions rather than Angel Oak Mortgage REIT, Inc.

The Company files separate U.S. federal and state corporate income tax returns for Angel Oak Mortgage REIT, Inc. and AOMR TRS. AOMR TRS is taxed as a standalone U.S. C‑corporation on all of its separately computed taxable income. The Company’s federal income tax returns for 2019 and forward are subject to examination. The Company’s state income tax returns are generally subject to examination for 2019 and forward.

The following table sets forth the income tax provision (benefit) as recorded in the Company’s consolidated statements of comprehensive income (loss) for the years ended December 31, 2025 and December 31, 2024:

December 31, 2025December 31, 2024
(in thousands)
Current
Federal$494 $6,474 
State37 848 
Total current income tax expense531 7,322 
Deferred
Federal(149)(3,382)
State(30)(679)
Total deferred income tax expense (benefit)(179)(4,061)
Total income tax expense (benefit)$352 $3,261 

Deferred Tax Assets (“DTAs”) and Assessing the Realizability of the Company’s DTAs

Realization of the Company’s DTAs as of December 31, 2025, is dependent on many factors, including generating sufficient taxable income prior to the expiration of net operating loss (“NOL”) carryforwards (where applicable). The Company determines the extent to which realization of its deferred assets is not assured and establishes a valuation allowance accordingly. As the Company’s TRS incurred a NOL during the year ended December 31, 2022, the Company closely analyzed its estimate of the realizability of its net DTAs in whole and in part. The NOLs incurred in 2022 can be carried forward indefinitely, until fully utilized. The Company evaluates its DTAs each period to determine if a valuation allowance is required based on whether it is “more likely than not” that some portion of the DTAs would not be realized. This evaluation requires significant judgment, and changes to the Company’s assumptions could result in a material change in the valuation allowance. The ultimate realization of these DTAs is dependent upon the generation of sufficient taxable income during future periods. The Company conducts its evaluation by considering, among other things, all available positive and negative evidence, historical operating results and cumulative earnings analysis, forecasts of future profitability, and the duration of statutory carryforward periods. Based on this analysis, the Company continues to believe it is more likely than not that it will not fully realize its federal and state DTAs in future periods. Therefore, the Company has recorded a valuation allowance against the majority of its DTAs, as set forth in the table, below.

The Company’s estimate of net DTAs could change in future periods to the extent that actual or revised estimates of future taxable income during the carryforward periods change from current expectations. The Company assessed its tax positions for all open tax years and concluded that it had no uncertain tax positions that resulted in material unrecognized tax benefits. The tax effects of temporary differences
that give rise to significant portions of the net DTA recorded at the TRS entity as of December 31, 2025 and December 31, 2024 are set forth in the following table:

December 31, 2025December 31, 2024
(in thousands)
DTA
Net operating loss carryforward
$29,981 $37,455 
Utilization of operating loss carryforwards
(179)(4,026)
Valuation allowance(26,528)(29,972)
Total DTA3,274 3,457 

Reconciliation of Statutory Tax Rate to Effective Tax Rate

The difference between the Company’s reported provision for income taxes and the U.S. federal statutory rate of 21% is set forth as follows for the years ended December 31, 2025 and 2024:

December 31, 2025December 31, 2024
Federal statutory rate21.00 %21.00 %
State statutory rate, net of federal tax effect4.26 %4.26 %
Change in valuation allowance(0.40)%(12.58)%
Non-taxable REIT income(21.34)%(5.91)%
Total provision3.52 %6.77 %