Palantir Reported $1.5 Billion in Profits and Paid $0 in Federal Income Tax — Legally. Here's How.

Palantir reported $1.5 billion in U.S. profits last year.

The IRS collected exactly $0.

Not a typo. Not an error. Totally, 100% legal — and thanks largely to provisions written into the tax code that CPAs advise on every single day. The Institute on Taxation and Economic Policy (ITEP) published the numbers on February 17, 2026, and they're worth understanding inside and out. Because your corporate clients are going to read about this, and then they're going to call you.

Here's what happened, how it's possible, and what it means for your practice.

How Palantir Paid Zero Federal Income Tax on $1.5 Billion in Profits

The short answer: stock-based compensation (SBC) deductions.

When a company like Palantir grants employees and executives stock options or restricted stock units (RSUs), those grants don't immediately hit the income statement as a cash expense. But when the stock is exercised or vests, the company gets to deduct the spread between the grant price and the market price as a compensation expense — even if the company never actually wrote a check.

Palantir's stock went on a tear. When prices go up, those SBC deductions explode in value. A stock option granted when shares were at $10 and exercised at $80 generates a $70-per-share deduction. Scale that across millions of shares, and suddenly a company reporting massive book profits on its income statement has little to no taxable income.

That's the gap the accountants call "book-tax difference." It's the same reason a company can show GAAP profits to shareholders while showing losses (or near-zero income) to the IRS.

The Trump Tax Law Connection

ITEP specifically flagged the role of Trump-era tax law — specifically, provisions from the 2017 Tax Cuts and Jobs Act — in enabling Palantir's $0 bill.

The TCJA and subsequent rules accelerated and expanded several corporate deductions that high-growth tech companies benefit from disproportionately:

• SBC deductions at current fair market value — unchanged and unphased under current law

• R&D amortization changes — TCJA's Section 174 forced R&D capitalization starting in 2022, but tech companies have found ways to layer credits and deductions strategically

• Deferred tax strategies — losses from prior years (Palantir was unprofitable for a long time) create tax loss carryforwards that offset current-year income

Palantir also benefits from R&D tax credits, which directly reduce the tax bill dollar-for-dollar — not just a deduction, an actual credit.

This Isn't New — But It's Getting Louder

Palantir isn't alone. This is a well-documented playbook.

Amazon famously paid $0 in federal income tax in 2018 on $11 billion in profits. Nike and FedEx have done it too. Tesla paid $0 in 2025 on $5.7 billion in U.S. income.

ITEP's research found that four of the corporations whose CEOs attended Trump's 2025 inauguration collectively received $51 billion in federal tax breaks in 2025. That's not a coincidence — these are companies deeply embedded in the tax strategies the current code encourages.

The political debate around this is heating up. But for CPAs, the real story isn't the politics. It's the mechanics.

What CPAs Need to Know Right Now

If you have corporate clients or startup clients with equity compensation programs, these are the levers worth understanding:

1. SBC Deductions Are a Legitimate Tax Planning Tool

When a company issues equity compensation and the stock appreciates, the deductible amount increases. Modeling this out early in the tax year — not after the fact — can dramatically change a client's tax picture.

2. R&D Credits Stack With SBC Deductions

If your client has both an active R&D program and a significant stock compensation plan, the combination can legally reduce taxable income to near zero. Make sure you're running both analyses simultaneously.

3. Net Operating Loss Carryforwards Are Still in Play

Palantir carried years of losses from its pre-profitable days. Those NOLs can be carried forward indefinitely under current law (though limited to 80% of taxable income per year). If a client is just now turning profitable after years of losses, this is a conversation to have immediately.

4. Book vs. Tax Income Is Not the Same Number — And That's Okay

A client seeing strong GAAP profits on their P&L might owe very little in federal taxes. Help them understand the difference before they're blindsided by a tax bill — or before they're confused about why their accountant says they owe less than they expected.

The Bottom Line

Palantir didn't cheat. They hired good tax advisors, deployed legal provisions in the tax code exactly as written, and ended up with a $0 federal tax bill on $1.5 billion in profits.

Your clients will see this headline and wonder if they can do the same. The answer is: it depends — on their structure, their equity program, their R&D activity, and their history of losses. But the mechanisms are real, they're legal, and they're worth a conversation.

That conversation is your value add. Know the playbook.

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