The tech giant’s current federal taxes dropped to US$2.5 billion from US$14.1 billion the previous year, despite reporting US$103.6 billion in domestic revenue, a nearly 50% increase from the year before, according to disclosures filed Wednesday with the Securities and Exchange Commission.

Microsoft did not specifically attribute the savings to the 2025 law, which expanded business deductions for research and development investments and equipment purchases. But it’s the latest example of the country’s largest corporations, including Amazon.com Inc, Walmart Inc and others, reporting big tax savings in the first year following the passage of Trump’s cuts last summer. 

The US$2.5 billion tax expense does not reflect the actual cash taxes Microsoft paid to the Internal Revenue Service in the fiscal year ending June 30, which amounted to US$6.2 billion. But it is the best way to measure the taxes incurred during the year, as cash taxes may fluctuate based on circumstances from prior years. It also does not include US$12.8 billion in deferred taxes.

With sizable investments in artificial intelligence and data centres, Microsoft was especially primed to take advantage of provisions of the law allowing companies to speed up deductions for equipment purchases. Microsoft’s capital expenditures, a key metric of data centre spending, reached US$41 billion during the most recent quarter.

“We know that Microsoft in particular and tech sector more generally are spending huge amounts of money in the last year, especially the last six or last three months, on artificial intelligence,” said Matthew Gardner, a senior fellow at the left-leaning Institute on Taxation and Economic Policy. “It’s super clear that data center capex is eligible for depreciation.”

The company derived about US$12 billion — roughly two-thirds — of its tax savings over the last fiscal year by accelerating write-offs for equipment and machinery purchases, Gardner said based on his analysis of the disclosures.

Many of the business tax breaks enacted in last year’s law amounted to timing changes, allowing companies to immediately collect tax savings that they otherwise would have spread over several years under previous rules.

Microsoft reported an effective tax rate of 19.4%, which is up slightly from the prior two years but still below the 21% headline US corporate rate.

Microsoft also reported US$12.6 billion in current foreign taxes. It attributed US$4.3 billion in tax savings to profits located in Ireland, a low tax country. 

The company declined to comment.

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