Amazon's Tax Bill Dropped 87% Amid 45% Profit Rise

- The 87% reduction in Amazon's current U.S. federal taxes saw the company's bill fall to $1.2 billion for 2025, down from $9 billion in the prior year. This occurred as the company's U.S. pretax profits rose by 44.5% to $89.5 billion. - The primary driver of the tax reduction was the "One Big Beautiful Bill Act of 2025," which reinstated and made permanent several business-friendly tax provisions. Key among these for Amazon were the restoration of 100% bonus depreciation for new equipment and the immediate expensing of domestic research and development costs. - Amazon's capital expenditures surged by 59% to $132 billion in fiscal year 2025, with a significant portion directed towards building out AWS data center infrastructure to support advancements in artificial intelligence. These massive investments in equipment and technology generated substantial tax deductions under the new law. - While the company's cash tax payments decreased significantly, its reported income tax expense under GAAP (Generally Accepted Accounting Principles) nearly doubled in the first nine months of 2025. This accounting measure includes deferred taxes, suggesting the accelerated deductions represent a shift in the timing of tax payments rather than a permanent elimination. - In response to scrutiny, Amazon has stated that the tax changes enacted by Congress were designed to encourage greater investment in the American economy, innovation, and workers. The company highlighted its $340 billion in U.S. investments in 2025 as evidence of its contribution to these goals. - This significant tax reduction is not unique to Amazon; other major tech companies like Microsoft and Google have also benefited from the same tax law changes as they increase their investments in AI and cloud infrastructure. The four largest tech firms, including Amazon, collectively paid an effective federal tax rate of 4.9% on $315 billion in U.S. profits in 2025. - The 2025 tax law permanently extended several provisions from the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire. For multinational corporations, the law also introduced a more favorable effective tax rate for global intangible low-taxed income (GILTI). - Historically, Amazon has faced criticism for its tax strategies. A 2019 report by the Fair Tax Mark identified Amazon as a notable example of tax avoidance, citing a 12% effective tax rate between 2010 and 2018, a period when the statutory U.S. corporate tax rate was as high as 35%.