GILTI Tax and Form 8992 for Individual U.S. Shareholders
- What Is GILTI Tax?
- Who Does GILTI Apply To?
- How Is GILTI Calculated?
- What Are the GILTI Tax Rates?
- What Is Form 8992?
- What Is Form 8992 Schedule A?
- What Is Form 8992 Schedule B?
- How Do You File Form 8992?
- What Changed for Tax Years Beginning After 2025?
- The Same Profit Can Produce Two Very Different Bills
- Frequently Asked Questions
GILTI, or Global Intangible Low-Taxed Income, is a U.S. tax on the profits of a foreign corporation you own at least 10% of, charged every year whether or not the company pays you anything. You report it on Form 8992. For an individual owner, the inclusion is taxed at ordinary rates, up to 37%, with no credit for the foreign tax the company already paid. For tax years beginning after December 31, 2025, the same calculation is renamed Net CFC Tested Income.
This applies to you if you:
- Own 10% or more of a foreign corporation: counted by vote or by value, and counted directly, indirectly, and constructively, which catches more people than expected.
- You are already filing Form 5471; the same threshold applies to both forms.
- Had profit in the company this year: distributed or not.
- Have never made a Section 962 election, which is the difference between an ordinary rate and a corporate one.
What Is GILTI Tax?
GILTI is an annual U.S. tax charge on your share of a controlled foreign corporation’s profits. It exists to stop U.S. shareholders parking earnings offshore indefinitely. You are taxed as the company earns, not when it distributes, which is the part most owners find surprising.
From tax years beginning after December 31, 2025, the amount is called Net CFC Tested Income: same mechanism, new name.
What counts as tested income
Almost everything the company earns, with four carve-outs:
- Subpart F income: taxed under its own regime, and our comparison of GILTI and Subpart F covers which lands where.
- Income already highly taxed abroad: where the high-tax exception applies and the income is carved out before the calculation begins.
- Income effectively connected to a U.S. trade or business: already inside the U.S. net.
- Certain oil and gas extraction income: carved out by statute.
Who Does GILTI Apply To?
Two tests, both of which must be met. You must be a U.S. shareholder, meaning you own 10% or more of the foreign corporation by vote or by value. The company must be a controlled foreign corporation, meaning U.S. shareholders together own more than half of it.
Ownership counts directly, indirectly, and constructively. Shares held through another entity count. Shares held by certain family members can count. Our guide to controlled foreign corporation status works through the attribution rules, which is where most surprises come from.
If you have already filed Form 5471 for the company, you have crossed the threshold.
How Is GILTI Calculated?
Start with the company’s gross income, subtract the deductions properly allocable to it, and the statute is explicit that this includes taxes. Foreign corporate tax comes out before anything reaches your return. For tax years beginning after 31 December 2025, there is nothing further to subtract, because 26 U.S.C. 951A repealed the QBAI deduction.
Example: Sarah owns a UK-based marketing consultancy
| Line | Amount |
|---|---|
| Company gross income | $95,000 |
| Operating expenses | $35,000 |
| Profit before UK tax | $60,000, about £48,000 |
| UK corporation tax at 19% | $11,400 |
| Tested income, net of tax | $48,600 |
| QBAI reduction | none, repealed |
| Net CFC tested income | $48,600 |
At about £48,000, the company falls below the £50,000 threshold, so it pays UK corporation tax at the gov.uk small profits rate of 19%, below the 25% main rate that applies above £250,000.
Without a Section 962 election, Sarah is taxed as an individual. At a 24% marginal rate, the inclusion costs her $11,664, and she gets nothing for the $11,400 of UK tax already paid, because the deemed-paid credit belongs to corporations.
With a Section 962 election, she is taxed as a corporation on this income. The deemed-paid credit is 90% of the UK tax, or $10,260, which is added back to the inclusion under the gross-up rule, resulting in $58,860. The 40% Section 250 deduction leaves $35,316 taxable at 21%, for a total of $7,416. The credit exceeds the tax, so she owes nothing.
Same company, same year, same profit. The election is worth $11,664 to her.
What Are the GILTI Tax Rates?
There are two answers, and which one applies to you is the most consequential thing on this page. An individual pays ordinary marginal rates, up to 37%, with no foreign tax credit. A corporation, or an individual who elects to be taxed as one, pays an effective 12.6% and can credit 90% of the foreign tax.
| Individual, no election | Corporation or 962 elector | |
|---|---|---|
| Rate on the inclusion | Ordinary rates, up to 37% | 12.6% effective |
| Section 250 deduction | Not available | 40% |
| Credit for foreign tax paid | None | 90% deemed-paid |
| Foreign rate needed to offset in full | No offset available | About 14% |
The 12.6% comes from applying the 21% corporate rate to 60% of income, after the Section 250 deduction of 40%. That deduction fell from 50% for tax years beginning after 31 December 2025 under 26 U.S.C. § 250, thereby raising the effective rate from 10.5%.
The route from the first column to the second is a Section 962 election. The election carries a later cost: money distributed from that income can be taxed again beyond what the election already covered, so it is worth modeling both paths before you file.
Why This Hits Americans Abroad Harder
If you moved abroad and incorporated locally, you probably did it for local reasons: limited liability, client requirements, or because a sole trader structure did not work where you live. The U.S. tax code treats that company the same as an offshore holding structure, and the individual rate applies either way.
Two things make it worse in practice. The Foreign Earned Income Exclusion does nothing here because a GILTI inclusion is not foreign earned income. And you may owe U.S. tax in a year the company distributed nothing to you, which means finding the cash from somewhere else.
Neither is a reason to panic. Both are reasons to check whether an election changes your position while the return is still open.
What Is Form 8992?
One form covers every controlled foreign corporation you hold. It takes your pro rata share of each company’s tested income and tested loss, nets them against each other, and produces the single inclusion amount reported on your return under Section 951A.
Form 5471 reports the corporation. Form 8992 calculates what you owe. A tested loss in one company offsets tested income in another, which is why a single Form 8992 covers both and why owners of more than one entity often get this wrong.
One exception: if you hold your interest through a domestic partnership, the partnership reports your share on Schedules K-2 and K-3, and you do not complete Form 8992 directly.
What Is Form 8992 Schedule A?
Schedule A reports the per-company figures for filers outside a U.S. consolidated group, which is almost everyone. It lists each controlled foreign corporation on its own line, with your pro rata share of that company’s tested income or tested loss, and then totals them on the main form.
Hold one company, and Schedule A has one populated row. In the December 2026 draft, it also allocates net CFC-tested income back to the companies that produced it, which the foreign tax credit calculation later draws on.
What Is Form 8992 Schedule B?
Schedule B is for members of a U.S. consolidated group because the consolidated group is calculated at the group level. Where the group holds CFCs through more than one member, Schedule B aggregates across the group first, then allocates the result back to individual members.
Individual U.S. shareholders do not use it.
On both schedules: the December 2026 revision of Form 8992 is an IRS draft, marked “Do Not File” and subject to change.
How Do You File Form 8992?
The form is filed with your return, not separately. Nothing on it originates from it.
- Start with Form 5471: each company’s tested income or tested loss is calculated there, on Schedule I-1.
- Take your pro rata share of each figure.
- Aggregate and net them: total tested income across all your CFCs, less total tested loss.
- Complete Schedule A, or Schedule B if you are in a consolidated group.
- Carry the result to your return as your Section 951A inclusion.
- Claim the deduction on Form 8993 if you are entitled to it, not on this form.
Americans abroad have automatic eligibility until June 15, which can be extended to October 15.
What to have ready before you start: the company’s financial statements for the year, its functional currency and the exchange rates used, your ownership percentage and how it is held, any foreign tax the company paid, and last year’s Form 5471 if there is one. Tested income is calculated in the company’s functional currency and translated, so the rates matter.
Late filing carries its own penalties, separate from any tax due. Form 5471 imposes a $10,000 penalty per company per year, and if the form remains outstanding 90 days after the IRS issues notice, an additional $10,000 applies for each 30-day period, up to $50,000. Filing on time, or requesting an extension, avoids all of it.
What Changed for Tax Years Beginning After 2025?
Four things changed at once, and together they raise the cost for most owners: the calculation was renamed, one deduction disappeared, another shrank, and the foreign tax credit improved.
| Through 2025 | From 2026 | |
|---|---|---|
| Name of the calculation | GILTI | Net CFC Tested Income |
| QBAI deduction | 10% of qualified business asset investment | Repealed |
| Section 250 deduction | 50% | 40% |
| Effective rate, corporations and 962 electors | 10.5% | 12.6% |
| Deemed-paid foreign tax credit | 80% | 90% |
| Foreign rate needed to offset in full, with a 962 election | 13.125% | 14% |
The left column still governs the return you file in 2026 for last year. Our guide to NCTI (what replaced GILTI) covers the regime itself and the planning around it.
The Same Profit Can Produce Two Very Different Bills
The same company profit produces two very different U.S. bills depending on one election, and nothing about the business has to change between them. The default treatment is the expensive one; the alternative depends on an election you have to know exists, and the changes that took effect for tax years beginning after 31 December 2025 moved the arithmetic on both sides.
Greenback’s U.S. CPAs and Enrolled Agents prepare the returns these forms attach to, Form 5471 for the company and Form 8992 for your inclusion, and run the Section 962 comparison against your own figures as part of the return. Both forms are listed under our additional expat tax services, alongside the other filings a foreign corporation may need to make.
Get Your CFC Filings Right the First Time
Frequently Asked Questions
Global Intangible Low-Taxed Income. Despite the name, it applies to ordinary trading profits, not only to intangible or low-taxed income, which is why the term confuses people. From the 2026 tax year, it is called Net CFC Tested Income.
If your only controlled foreign corporation had a tested loss, there is no inclusion to report. If you hold more than one company, a loss in one offsets income in another on the same form, so you file whenever the netted figure is positive.
Any U.S. shareholder of a controlled foreign corporation with tested income for the year: 10% or more ownership by vote or value, counting direct, indirect, and constructive ownership, in a company that U.S. shareholders together control.
Yes. The form and the obligation both continue. From 2026 onwards, it calculates Net CFC Tested Income. The IRS has published a draft revision for December 2026, retitled accordingly, which is not yet final.
Ordinary marginal rates, up to 37%, with no credit for the foreign tax the company paid. The 12.6% figure quoted in most guidance is the corporate rate, which an individual can reach only through a Section 962 election.
No. The exclusion applies to foreign earned income, meaning wages and self-employment income for services performed abroad. A GILTI inclusion is your share of a corporation’s profits, so the exclusion does not reach it. This is the most common mistake owners make.
Yes. The charge falls on the company’s profits as they arise, whether or not any money reaches you. That timing mismatch is the practical difficulty for most owners, and it is why the calculation is worth running before year-end.
From the IRS forms library, along with Schedule A, Schedule B, and the instructions, which are published separately from the form. Check the revision date, since the NCTI version is currently a draft.
This article is for general information and is not personal tax advice. The rules described changed for tax years beginning after December 31, 2025, and the December 2026 revision of Form 8992 remains a draft subject to change. Controlled foreign corporation reporting is fact-specific, and the right answer depends on your ownership structure, your other income, and the elections available to you. Speak with a qualified adviser with expertise in U.S. international tax before acting.
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