Amazon is one of the biggest companies in the world. It makes billions every year, but a lot of people wonder: how much does Amazon really pay in taxes? The answer might surprise you because Amazon’s tax payments don’t always match what you’d expect from such a giant.
Amazon’s Tax Bill: The Big Picture
In 2024, Amazon paid about $9.3 billion in federal income taxes. That’s a large number, but it’s actually only about 6% of their taxable income, which is far less than the standard U.S. corporate tax rate of 21%.
This means Amazon's tax bill is much smaller compared to their huge profits. Why? Because they use various tax deductions and credits, all legal, that bring their tax rate down. Some of these include:
- Tax credits for research and development
- Deductions for stock options granted to employees
- Deductions on foreign-derived intangible income (FDII)
These cuts add up to billions saved annually.
Photo by Nataliya Vaitkevich
Why Is Amazon Paying So Little in Taxes?
Amazon’s low tax rate isn’t a mistake or due to flaws in the system. It’s mostly because the company uses available rules to their advantage. When Amazon hands out stock to employees, the value of that stock when it vests is deductible for taxes. This can reduce taxable income without affecting the profit Amazon reports on its financial statements.
In practice, this means Amazon often shows large profits on paper but pays less in taxes than expected. For example:
- In 2021, Amazon earned more than $35 billion before taxes.
- They paid only around $2.1 billion in federal income taxes.
- That’s an effective tax rate of only 6%, saving about $5.2 billion compared to the full tax rate.
Amazon isn’t hiding money illegally, but it is placing its bets on every tax break available.
State and Local Taxes: More Than Just Federal
On top of federal taxes, Amazon pays state and local taxes. These are often tied to things like:
- Property taxes on fulfillment centers
- Sales taxes collected from customers
- Local business taxes and fees
Amazon has received billions in state and local subsidies that help cut their tax bills even more. Cities and states offer these breaks to attract companies for jobs and investment, but the long-term benefits to communities remain debated.
How Amazon’s Tax Payments Compare to Other Companies
Compared to some other large corporations, Amazon’s effective tax rate is low but not unusual among tech giants. Many big companies use stock-based compensation and foreign income deductions to reduce tax bills.
Here are a few points to note:
- Amazon’s tax rate has averaged around 5% over the last few years.
- The U.S. statutory corporate tax rate remains 21%.
- Tax credits and deductions Amazon uses are supported by current tax laws.
What This Means for You and the Economy
If you think Amazon is paying far less than you expected, you’re right. But the picture is complex. Lower corporate taxes help companies invest in new projects and jobs, but critics argue that companies like Amazon avoid paying a fair share, especially given their market size.
This has sparked debates about:
- Whether tax laws need to change to close loopholes
- How much corporations should contribute to public services
- The fairness of the current tax system
Conclusion: Amazon’s Tax Bill Reflects the Current Tax System
Amazon’s billions in tax payments sound huge, but given their profits, the percentage they pay is quite small. They benefit from deductions and credits that lower their rates. This is allowed by U.S. tax laws, but it raises questions about fairness and whether reforms are needed.
Understanding how much Amazon pays in taxes gives you insight into how tax policy works for big companies—and why tax debates are so heated. As laws change and public pressure grows, it will be interesting to see if Amazon’s tax rate stays the same or changes in the future.
In the meantime, Amazon will continue to use every legal tool to reduce its tax bills just like many other large companies do.
Key takeaways:
- Amazon paid roughly $9.3 billion in federal taxes in 2024.
- Their effective tax rate is about 6%, well below the 21% standard rate.
- Stock options and foreign income deductions greatly reduce their tax liability.
- State and local subsidies further decrease Amazon’s overall tax burden.
- The fairness of their tax payments is part of a larger national debate on tax policy.