| Income taxes |
Note 13 — Income taxes
The provision for income
taxes for the years ended December 31, 2025 and 2024 consisted of the following:
| | |
December 31,
2025 | | |
December 31,
2024 | |
| Income Tax Expense | |
| | |
| |
| Current federal tax expense | |
| | |
| |
| Federal | |
$ | - | | |
$ | - | |
| State | |
| 1,700 | | |
| 5,100 | |
| Foreign | |
| - | | |
| - | |
| Deferred tax | |
| | | |
| | |
| Federal | |
| - | | |
| - | |
| State | |
| - | | |
| - | |
| Foreign | |
| - | | |
| - | |
| Total | |
$ | 1,700 | | |
$ | 5,100 | |
The components of loss before income taxes attributable to domestic
and foreign operations for the years ended December 31, 2025 and 2024 consisted of the following:
| | |
December 31,
2025 | | |
December 31,
2024 | |
| Loss before income taxes | |
| | |
| |
| Current federal tax expense | |
| | |
| |
| Domestic income | |
$ | 11,985,054 | | |
$ | 13,648,240 | |
| Foreign income | |
| - | | |
| - | |
| Total loss before taxes | |
$ | 11,985,054 | | |
$ | 13,648,240 | |
The Company is subject to U.S. federal income tax as well as income
tax of state tax jurisdictions. The following is a reconciliation of income tax expenses at the effective rate to income tax at the
calculated statutory rates:
| | |
For the Year Ended
December 31, 2025 | |
| | |
$ | | |
% | |
| Provision for income taxes at U.S. federal statutory rate | |
$ | 2,516,861 | | |
| 21.00 | % |
| State and local income taxes, net of federal benefit(1) | |
| 776,625 | | |
| 6.47 | |
| Change in valuation allowance | |
| (3,282,223 | ) | |
| (27.37 | ) |
| Tax effect of non- deductible expenditure | |
| (12,963 | ) | |
| (0.11 | ) |
| Total tax provision and effective tax rate | |
$ | (1,700 | ) | |
| (0.01 | )% |
| | |
For the Year Ended
December 31,
2024 | |
| | |
$ | | |
% | |
| Provision for income taxes at U.S. federal statutory rate | |
$ | 2,872,093 | | |
| 21.00 | % |
| State and local income taxes, net of federal benefit(1) | |
| 943,709 | | |
| 6.90 | |
| Change in valuation allowance | |
| (3,805,714 | ) | |
| (27.83 | ) |
| Tax effect of non- deductible expenditure | |
| (15,188 | ) | |
| (0.11 | ) |
| Total tax provision and effective tax rate | |
$ | (5,100 | ) | |
| (0.04 | )% |
| (1) | State taxes in California, Ohio and Delaware made up the majority (greater
than 50%) of the tax effect in this category. |
As of December 31, 2025 and 2024 the income tax payable was $299,020 and
$297,991, respectively, and the net deferred tax asset was $0 and $0, respectively.
The supplemental schedule of cash paid for interest and income taxes
consists of following:
| | |
December 31,
2025 | | |
December 31,
2024 | |
| Cash paid during the period of income taxes, net of refunds | |
| | |
| |
| Federal | |
$ | - | | |
$ | - | |
| State and local | |
| 1,700 | | |
| - | |
| Foreign | |
| - | | |
| - | |
| Total cash paid during the period for income taxes | |
$ | 1,700 | | |
$ | | |
| Cash paid during the period for income taxes (prior to ASU 2023-09) | |
$ | | | |
$ | 5,100 | |
The significant components that comprised the Company’s net deferred
taxes are as follows:
| | |
As of
December 31,
2025 | | |
As of
December 31,
2024 | |
| Deferred tax assets/(liabilities) | |
| | |
| |
| Property and equipment | |
| (70,758 | ) | |
| (70,758 | ) |
| Right-of-use assets | |
| 65,189 | | |
| 66,063 | |
| Allowance for credit loss | |
| 950,674 | | |
| 441,890 | |
| Inventory impairment | |
| 1,046,087 | | |
| 1,003,122 | |
| Cost method investment impairment | |
| 279,836 | | |
| - | |
| Net operating loss – federal | |
| 6,527,196 | | |
| 4,237,504 | |
| Less: valuation allowance | |
| (8,798,224 | ) | |
| (5,677,821 | ) |
| Total deferred tax assets/(liabilities) | |
| - | | |
| - | |
The Company’s cumulative net operating loss (“NOL”)
of approximately $26.0 million as of December 31, 2025 was mainly from NOL of Nature’s Miracle, Visiontech and Nature’s
Miracle Holding Inc.. The Company evaluated the recoverable amounts of deferred tax assets and provided a valuation allowance to the extent
that future taxable profits will be available against which the net operating loss and temporary difference can be utilized. The Company
considers both positive and negative factors when assessing the future realization of the deferred tax assets and applied weigh to the
relative impact of the evidence to the extent it could be objectively verified.
|