GILTI Foreign Income 2027
GILTI: tested income - QBAI × 10%. Tax: 21% × 50% deduction (37(k)) = 10.5% effective. Plus FTC offset up to 80%.
| CFC tested income | — |
| QBAI | — |
| QBAI 10% exemption | — |
| GILTI inclusion | — |
| Section 250 deduction (50%) | — |
| Taxable GILTI | — |
| 21% tax (pre-FTC) | — |
| Foreign tax paid | — |
| FTC available (80%) | — |
| Net GILTI tax | — |
| Effective rate | — |
GILTI (Global Intangible Low-Taxed Income) is a US corporate tax on income earned by Controlled Foreign Corporations (CFCs). Designed by TCJA to discourage profit-shifting overseas. Effective rate: 10.5% (21% × 50% deduction). Major change in 2027 — may rise per OBBB provisions.
Calculation Mechanics
Tested income = net income of CFC (excluding Subpart F and certain other items). QBAI = qualified business asset investment (depreciable property). Exempt 10% of QBAI. Remainder is GILTI inclusion to US shareholder. Then 50% deduction (Section 250) + 80% FTC.
Section 250 Deduction
50% deduction on GILTI inclusion makes effective rate 10.5% (vs full 21%). Subject to taxable income limitation. For tax years 2026+, deduction drops to 37.5%, making effective rate 13.125%. OBBB may modify further — monitor for changes.
Foreign Tax Credit Offset
Only 80% of foreign tax paid usable as FTC against GILTI. Encourages locating in higher-tax foreign jurisdictions (UK, DE) since FTC fully offsets US tax. Discourages tax havens (BVI, Cayman) where minimal foreign tax = minimal FTC offset.
Last updated May 2026. Sources: IRS GILTI Resources.