v3.26.1
Income Taxes
 12 Months Ended
Feb. 28, 2026
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income Tax Provision
 Years Ended February 28 or 29
202620252024
(In thousands)CurrentDeferredTotalCurrentDeferredTotalCurrentDeferredTotal
Federal$39,579 $71,014 $110,593 $156,819 $(22,253)$134,566 $140,480 $(6,542)$133,938 
State22,764 2,786 25,550 35,709 (1,471)34,238 26,711 1,742 28,453 
Total$62,343 $73,800 $136,143 $192,528 $(23,724)$168,804 $167,191 $(4,800)$162,391 
 
Income Tax Provision and Effective Tax Rate Reconciliation
 Years Ended February 28 or 29
 202620252024
(In thousands)$%$%$%
Federal tax at statutory rate80,521 21.0 140,566 21.0 134,735 21.0 
Domestic federal:
Effect of changes in tax laws or rates enacted in the current period3,273 0.9 — — — — 
Tax credits:
Research and development credit(4,158)(1.1)(5,426)(0.8)(4,179)(0.6)
Purchased tax credits(4,468)(1.2)(5,777)(0.9)— — 
Other credits(115)— (63)— (375)(0.1)
Changes in valuation allowances(10)— 55 — (117)— 
Nontaxable or nondeductible items:
Executive compensation6,055 1.6 7,238 1.1 5,786 0.9 
Goodwill impairment 29,564 7.7 — — — — 
Other nontaxable or nondeductible items3,242 0.8 2,840 0.4 2,873 0.4 
Other (1)
2,384 0.6 3,449 0.5 1,367 0.2 
Domestic state and local income taxes, net of federal effect (2)
20,713 5.4 26,841 4.0 23,495 3.7 
Changes in prior year unrecognized tax benefits(858)(0.2)(919)(0.1)(1,194)(0.2)
Income tax provision and effective tax rate136,143 35.5 168,804 25.2 162,391 25.3 
(1)Includes the federal tax impact of share-based compensation.
(2)For fiscal 2026, state and local taxes in California, North Carolina and Illinois made up the majority of the tax effect in this category. For fiscal 2025, state and local taxes in California, Illinois, Florida and North Carolina made up the majority of the tax effect in this category. For fiscal 2024, state and local taxes in California, Illinois and Texas made up the majority of the tax effect in this category.
Temporary Differences Resulting in Deferred Tax Assets and Liabilities
 As of February 28
(In thousands)20262025
Deferred tax assets:  
Accrued expenses and other$85,878 $98,861 
Allowance for loan losses110,197 111,385 
Net operating loss carryforwards and other tax attributes22,299 24,462 
Operating lease liabilities131,003 136,190 
Share-based compensation55,798 51,284 
Capital loss carryforward752 766 
Total deferred tax assets405,927 422,948 
Less:  valuation allowance(752)(766)
Total deferred tax assets after valuation allowance405,175 422,182 
Deferred tax liabilities:  
Intangibles35,375 39,317 
Prepaid expenses11,142 11,810 
Property and equipment148,019 82,285 
Operating lease assets115,479 123,520 
Inventory15,236 11,924 
Derivatives1,445 12,994 
Total deferred tax liabilities326,696 281,850 
Net deferred tax asset$78,479 $140,332 
As of the fiscal year ended February 28, 2026, CarMax’s net operating loss carryforwards and other tax attributes include a deferred tax asset of $5.4 million related to U.S. federal tax credit carryforwards, which expire between 2026 and 2042; a deferred tax asset of $2.1 million related to state net operating loss carryforwards, which expire between 2026 and 2039; and a deferred tax asset of $13.2 million related to state tax credit carryforwards that have no expiration.
Except for amounts for which a valuation allowance has been provided, we believe it is more likely than not that the results of future operations and the reversals of existing deferred taxable temporary differences will generate sufficient taxable income to realize the deferred tax assets.  The valuation allowance as of February 28, 2026 relates to capital loss carryforwards that are not more likely than not to be utilized prior to their expiration.
Reconciliation of Unrecognized Tax Benefits
 Years Ended February 28 or 29
(In thousands)202620252024
Balance at beginning of year$18,035 $28,817 $27,092 
Increases for tax positions of prior years2,667 138 397 
Decreases for tax positions of prior years(1,276)— (172)
Increases based on tax positions related to the current year2,723 4,669 3,627 
Settlements(951)(142)(386)
Lapse of statute(2,352)(15,447)(1,741)
Balance at end of year$18,846 $18,035 $28,817 

As of February 28, 2026, we had $18.8 million of gross unrecognized tax benefits, $12.3 million of which, if recognized, would affect our effective tax rate. As of February 28, 2025, we had $18.0 million of gross unrecognized tax benefits, $14.9 million of which, if recognized, would affect our effective tax rate.  As of February 29, 2024, we had $28.8 million of gross unrecognized tax benefits, $12.1 million of which, if recognized, would affect our effective tax rate.
On July 4, 2025, federal legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The OBBBA includes provisions that make 100% bonus depreciation permanent, allows for the expensing of domestic research costs and modifies the business interest expense and charitable contribution expense limitation calculations. These changes were incorporated into our income tax provision for the fiscal year ended February 28, 2026, resulting in an increase in our deferred tax expense, offset by a corresponding decrease in our current tax expense. The OBBBA did not have a material impact on our fiscal 2026 effective tax rate.
Our continuing practice is to recognize interest and penalties related to income tax matters in SG&A expenses.  Our accrual for interest and penalties was $6.0 million, $3.8 million and $5.3 million as of February 28, 2026, February 28, 2025 and February 29, 2024, respectively.
CarMax is subject to U.S. federal income tax as well as income tax of multiple states and local jurisdictions.  With a few insignificant exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years prior to fiscal 2023.