MSFT · 10-Q · 2026Q3 · Full report

Income Tax Rate Changes

MICROSOFT CORP · 2026-10-28 · Importance 15 · Surprise 14

Microsoft's effective tax rate increased to 20% for the three months ended September 30, 2026, from 19% a year earlier. The increase primarily reflected decreased tax benefits from stock-based compensation and changes in the mix of earnings and tax expenses between the U.S. and foreign countries. The effective rate remained below the U.S. federal statutory rate, primarily because earnings were taxed at lower rates through the company's foreign regional operations center in Ireland.

Key facts

• Microsoft's effective tax rate was 20% in the three months ended September 30, 2026, versus 19% in the prior-year quarter. source
• Microsoft's effective tax rate increased in Q1 FY2027 primarily because of decreased stock-based compensation tax benefits and changes in the mix of U.S. and foreign earnings and tax expenses. source
• Microsoft's effective tax rate was below the U.S. federal statutory rate in Q1 FY2027, primarily because of lower-rate foreign-jurisdiction earnings produced and distributed through its Ireland regional operations center. source