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Corporate America keeps making more money. It’s paying a lot less tax on it.
Corporate income tax collections fell by about $70 billion, or 16%, in the federal fiscal year that ended Sept. 30, to roughly $382 billion, according to preliminary figures from the Congressional Budget Office (1).
Corporate profits, meanwhile, kept climbing. They rose nearly 8% in 2025 and ran higher still in the first half of 2026, according to the Commerce Department’s Bureau of Economic Analysis (2).
How can companies earn more money, yet pay less in taxes? CBO says it plainly. The 2025 tax law President Donald Trump signed lets corporations take bigger deductions for certain investments. That offsets the tax increases you’d normally expect when corporate income rises (1).
Meanwhile, the federal deficit for the year came in just shy of $2 trillion (1). And CBO estimates the tax law will add $3.4 trillion to deficits over 10 years (3).
I’ve been a CPA since 1981. Some of what’s happening is a timing shift that partly evens out over time. Some of it isn’t. Here’s the difference, and what it means for your money.
How a company can earn more and pay less
Normally, when a business buys a big piece of equipment, it can’t deduct the whole cost the year it buys it. It deducts a slice each year instead. That’s called depreciation (7).
Trump’s tax law changed that. It made permanent a 100% first-year write-off for eligible equipment and other property acquired after Jan. 19, 2025 (4). It also lets businesses fully deduct domestic research and development spending right away, rather than writing it off over several years (5).
Here’s a simple example. Say a company spends $10 million on new computer servers. Now it can deduct all $10 million this year.
At the 21% federal corporate tax rate (6), that deduction cuts this year’s federal tax bill by $2.1 million. Under the old rules, only part of that savings would have come this year.
Now apply that to companies spending billions on servers, chips and other gear for AI data centers, and you can see how corporate tax payments shrank even as profits grew.
Is it a loophole? Mostly no, but there’s a catch
Supporters say this is how a tax system should work.
The Tax Foundation, a think tank that backs full write-offs, said in February that lower corporate tax collections would reflect how the new law changed the timing of business deductions, “not a collapse of the corporate tax base.” It expects revenue to eventually mostly recover (7).
Here’s why. A machine can only be written off once. Deduct it all this year, and there’s nothing left to deduct for it in later years. So taxes fall now and rise later.
Justin Fox, writing in a Bloomberg opinion column, made a similar point. He called the decline an expected result of the law and said it will be reversed to some extent as those write-offs drop off future tax returns (5).
As a CPA, I agree with the basic math. But here’s my read on the catch: “Later” only arrives if companies slow down their spending.
As long as they keep buying more each year, new write-offs keep replacing the old ones, and the tax bill keeps getting pushed down the road.
And in the meantime, the government still has to borrow the money it didn’t collect.
Meta’s bigger break draws bipartisan heat
Then there’s Meta, the parent company of Facebook and Instagram.
According to a letter from seven Senate Democrats, Meta has used the federal research tax credit to cut its federal income tax bill by $6.6 billion from 2023 through 2025. That’s $700 million, then $2 billion, then nearly $4 billion (8).
Citing news reports, the senators say Meta told the IRS that its AI data centers are experimental “pilot models” that qualify for the credit (8). They say it’s unclear exactly how much of the $6.6 billion came from data centers, but believe it’s a substantial share (8).
The senators cite a Joint Committee on Taxation estimate that the credit cost the government $32 billion in 2025. By that measure, they say, Meta alone would account for more than 10% of all research credits claimed in the U.S. (8).
They’ve asked Meta to answer their questions by Oct. 31 (8).
It isn’t just Democrats. A bipartisan group of House members, including Florida Republican Greg Steube, wrote to Treasury Secretary Scott Bessent. They warned that counting ordinary data-center costs could turn the credit into a subsidy for spending companies would do anyway (9).
Meta disagrees. A company spokesman, Andy Stone, told Semafor the new AI data centers “require extensive testing and experimentation that cannot be simulated in order to get the design and build right.” He called them the kind of investment Congress encouraged (10).
Still, the senators point out that Meta’s own annual report lists its research credits among its uncertain tax positions (8).
My take: This is a different animal from the write-offs above. A deduction lowers the income you’re taxed on, and much of it evens out over time. A credit comes straight off the tax bill. If the IRS lets Meta’s claims stand, that money isn’t coming back later.
Congress created the research credit in 1981 to encourage companies to invest in research (9). Whether a building full of chips counts as research is now a question the IRS and Treasury are being pressed to answer.
Who picks up the tab
When the government spends more than it takes in, the difference gets borrowed.
The federal government ran a deficit of nearly $2 trillion in fiscal 2026, CBO says. That’s $218 billion more than the year before (1). Net interest on the debt cost about $1.14 trillion, more than the government’s Medicare spending after premiums, by CBO’s tally (1).
To be fair, the corporate tax drop is only one piece of that. Spending on Social Security, Medicare, Medicaid and interest rose too (1).
But CBO’s estimate of $3.4 trillion in added deficits from the law as a whole, individual and business tax cuts together, comes from a $4.5 trillion drop in revenue, only partly offset by $1.1 trillion in spending cuts (3).
My read: Every dollar borrowed today carries interest. That bill eventually lands on taxpayers, or on the programs they count on.
You can’t rewrite the tax code. But you can make it work for you instead of against you. Here are three things to think about.
1. If you own stocks, you’re on the winning side
Lower corporate taxes leave more profit for shareholders. If you own an S&P 500 or total-market index fund in a 401(k) or IRA, you likely own a slice of the very companies benefiting from these write-offs.
Full disclosure: I own Meta and Microsoft stock myself, and they’ve done very well for me. That’s one reason I believe in owning great companies for the long haul instead of trying to trade in and out.
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2. Plan for the tax bill Washington hasn’t sent yet
A $2 trillion deficit doesn’t fix itself. My read: Sooner or later, Congress will have to raise more revenue, cut spending or both. Nobody knows yet whose taxes go up or whose benefits get trimmed.
That’s a good reason to keep some flexibility in how you’ll pay taxes in retirement. For example, having money in both traditional and Roth accounts means you’re not betting everything on today’s tax rates.
If you have serious savings, this is the perfect time to get an expert on your team.
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3. Own a small business? This write-off isn’t just for Meta
The 100% first-year write-off isn’t just for tech giants’ servers and chips. It covers a wide range of eligible business property (4). If you run a business or a serious side gig and you’re buying equipment, you may be able to deduct the full cost this year.
Just don’t buy something you don’t need to get a deduction. A $10,000 write-off saves you only a fraction of $10,000 in tax. Ask your tax preparer whether taking it all now makes sense for you.
The bottom line
Companies aren’t breaking the law by taking write-offs Congress handed them. My read: Most of this is a timing shift, and some of it should even out. Meta’s research credit is a different story, and it deserves the scrutiny it’s getting from both parties.
But here’s what I keep coming back to. A tax break doesn’t make a bill disappear. It just changes who pays it, and when. Right now, a lot of it is being paid with borrowed money.
You can’t control Washington’s checkbook. You can control yours. Own good companies, keep your tax options open, and don’t count on today’s tax rates lasting forever.
Sources: 1. Congressional Budget Office; 2. U.S. Bureau of Economic Analysis; 3. Congressional Budget Office; 4. IRS; 5. Bloomberg Tax; 6. Congressional Budget Office; 7. Tax Foundation; 8. U.S. Senate Committee on Finance; 9. Office of Rep. Jimmy Panetta; 10. Semafor
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