Income Taxes

3 Months Ended

Mar. 31, 2023

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

At the end of each interim period, we are required to estimate our annual effective tax rate for the fiscal year and to use that rate to provide for income taxes for the current year-to-date reporting period. Our 2023 estimated annual effective tax rate, before discrete items, of 25.0% is driven by our blended federal and state statutory rate of 24.6%, and certain permanent differences between GAAP and tax, including disallowed deductions for executive compensation and estimated federal energy home credits for the current year home deliveries, which combined resulted in a net increase of 0.4%.

For the three months ended March 31, 2023, our estimated annual rate of 25.0% was benefitted by discrete items which had a net impact of decreasing our rate by 0.7%, including excess tax benefits for vested stock-based compensation.

Our estimated annual rate for the three months ended March 31, 2023 of 25.0% increased by 260 basis points as compared to our effective tax rate for the year ended December 31, 2022 of 22.4%.  The increase in our estimated rate is a result of the enactment of the Inflation Reduction Act of 2022 during the third quarter of 2022, which modified the energy efficient home credit beginning with homes closed on or after January 1, 2023 and provided for more stringent energy standards than previous periods.

For the three months ended March 31, 2023 and 2022, we recorded income tax expense of $10.7 million and $46.3 million, respectively.