Elon Musk’s company avoided almost all federal income tax on over $12 billion of U.S. income over the past three years
Tesla, the company owned by a billionaire who briefly held a job seeking to cut federal government waste, received over $1.1 billion in federal income tax breaks from American taxpayers last year alone.
Tesla’s annual financial report, released this morning, shows the company enjoyed almost $5.7 billion of U.S. income in 2025—almost doubling the $2.98 billion the company enjoyed in 2024 – on which it reports precisely zero current federal income tax.
Over the past three years, the Elon Musk-led company reported $12.58 billion of U.S. income on which its current federal tax was just $48 million. This means that over the past three years, Tesla paid just 0.4 percent of its U.S. profits in federal income taxes, which is another way of saying the company reported an effective federal income tax rate of 0.4 percent. This is a tiny fraction of the 21 percent tax rate profitable corporations are supposed to pay under the law.
Tesla saved almost half a billion in taxes last year using accelerated depreciation. Tax breaks for executive stock options shaved $172 million off the company’s tax bill. R&D tax credits were good for $352 million of tax savings. Musk’s company also used net operating losses stored up from previous years to offset current year income, although it’s hard to know how much of that affects U.S. income rather than foreign income.
The calculations reported are based entirely on data taken from Tesla’s most recent annual financial report. The pretax U.S. income reported by Tesla is adjusted for large accruals the company has made for warranty reserves in each of the last three years, and also excludes small amounts of non-controlling income on which Tesla is not required to pay tax.
New income tax disclosure requirements, which took effect for all publicly traded companies in 2025, clarify the company’s tax situation a bit. Tesla’s cash income tax payments worldwide totaled $1.2 billion, of which over $1 billion was paid to China and other foreign governments. The company paid $28 million in cash taxes to the U.S. government, presumably related to tax years before 2025. (Current federal tax, the tax concept that is the basis for the “zero federal income tax” reported here, is the company’s best estimate of the tax they will pay, when returns are finalized, on current-year income, while cash tax represents the amount of money the company spent in 2025 related to any tax year, past or present.)
There is nothing to indicate that the billion-dollar tax break Tesla received last year was illegal. But Tesla’s latest disclosure illustrates quite clearly that the corporate tax laws, as modified by Congress and the Trump administration last summer, have allowed a hugely profitable corporate to avoid paying even a dime of federal income tax on their 2025 U.S. profits.
