AZ-900 Practice Question 61: Capex Opex Tax Treatment
Microsoft Azure Fundamentals (AZ-900) · Test 7 · question 1 of 10
A startup's finance lead wants to avoid a large upfront hardware purchase, and prefers to deduct IT costs in the same tax year they are incurred rather than depreciating equipment over several years. Which spending model matches these goals, and why?
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Answer:
Cloud consumption is classified as operating expenditure (OpEx), ongoing spending on services over time, billed as you use them, with no purchase of hardware up front. Microsoft's own guidance for shifting from a CapEx model to an OpEx model calls out immediate tax deductions as a benefit of the move: an organization should "review immediate tax deductions instead of depreciation" once spending is reclassified as OpEx. That is exactly what the finance lead is asking for.
Option B is wrong because a CapEx hardware purchase is the opposite of an immediate deduction; it is capitalized as an asset on the balance sheet and depreciated over its useful life, spreading the tax benefit across years rather than taking it all at once. Option C mislabels the model entirely: cloud subscriptions are OpEx, not CapEx, so there is no asset to depreciate. Option D reverses the accounting treatment that makes OpEx attractive here; OpEx spending is specifically *not* capitalized and depreciated the way owned hardware is.
Reference: Cost efficiency considerations for your cloud adoption strategy