The semiconductor giant Nvidia this week reported avoiding $6.8 billion in federal income taxes last year. The company did this in a year when it reported greater earnings growth than almost any corporation in history, with U.S. pretax income clocking in at an astonishing $123 billion. This is the second-highest single year of earnings ever reported by a publicly traded U.S. corporation, trailing only Alphabet’s $141 billion haul reported several weeks ago.
The company’s reported current federal tax bill of $19 billion computes to an effective federal income tax rate of 15.5 percent, meaning that Nvidia sheltered a quarter of its profits from the 21 percent statutory income tax rate last year. The tax strategies used by Nvidia to achieve this are pretty pedestrian: $4.2 billion from the Foreign-Derived Deduction-Eligible Income (FDDEI) deduction, $1.9 billion in unspecified tax credits, $1.4 billion from executive stock options, and $800 million from the new R&D expensing provision created by Congress last summer.
The $6.8 billion of federal income taxes Nvidia avoided by not paying the 21 percent tax rate last year was enough to reduce the entire nation’s corporate tax collections (which the Congressional Budget Office clocks at $452 billion) by 1.5 percent.
The company’s tax dodges might turn out to be even bigger than what these figures show us so far: Nvidia discloses $1.9 billion of “uncertain tax benefits” related to its 2025 income. These are tax breaks the company claims on its tax return that its leaders believe would, more likely than not, be disallowed by tax administrators on audit. Only a handful of Nvidia’s big-tech competitors have ever gambled bigger on probably-illegal tax breaks in American history. (Apple remains the champion at living dangerously by this measure, claiming a staggering $3.8 billion in probably-illegal tax breaks in 2025.) Given the increasingly cozy relationship between Nvidia CEO Jensen Huang and President Trump and the Trump administration’s repeated efforts to gut the IRS, Nvidia’s gamble on ineffective tax enforcement seems a pretty savvy one.
From a macro perspective, Nvidia is just one more (especially large) brick in the wall of a steady stream of multi-billion-dollar tax breaks disclosed by big multinationals this earnings season. Yesterday alone, Bank of America and Goldman Sachs reported effective federal income tax rates of 13.3 and 9.6 percent, respectively, on a combined total of $43 billion in U.S. pretax income. At these tax rates, these two financial giants drained almost $3.8 billion from the federal treasury last year. While the specter of dozens of profitable corporations avoiding federal income tax entirely has led to a heightened public awareness of an epidemic of corporate tax avoidance, it’s these truly gigantic corporations that are most eroding the nation’s tax system.
