Need help understanding GILTI tax rates for international income

I've been trying to wrap my head around how GILTI (global intangible low-taxed income) works for our family business that has some overseas operations. I think I've got most of it figured out, but there's still one aspect that's confusing me. On several tax resources and websites, I keep reading different explanations about the GILTI tax rates, but they seem to contradict each other. Some say one thing about how the rates apply, others explain it completely differently. I'm getting lost in all the technical jargon and calculation methods. Our business expanded internationally last year, and now I'm trying to prepare for tax implications. I understand GILTI generally applies to income from intangible assets held by foreign corporations, but how does the actual tax rate determination work? Is it applied to gross income or is there a deduction first? And how exactly does the foreign tax credit factor in? If anyone has experience dealing with GILTI calculations or could break down the tax rates in simpler terms, I'd really appreciate it. I've been staring at IRS publications for hours and my head is spinning!

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18 comments

Anastasia Sokolov

•8M

The GILTI provisions can definitely be confusing! Let me try to break this down into simpler terms. GILTI is basically designed to ensure U.S. shareholders of foreign corporations pay at least a minimum tax on their global income. The way the tax rate works is: first, you calculate your GILTI inclusion amount (which is essentially your foreign corporation's income above a 10% return on tangible assets). For individual taxpayers, GILTI is taxed at your ordinary income tax rates. However, C corporations get a special 50% deduction (known as the Section 250 deduction), effectively reducing the 21% corporate tax rate to 10.5% on GILTI income. Regarding foreign tax credits - corporations can claim up to 80% of foreign taxes paid on GILTI income. So if your foreign effective tax rate is above about 13.125%, you might not owe additional U.S. tax on your GILTI income after applying the foreign tax credit. The calculations get pretty complex because of various limitations and special rules that might apply depending on your specific situation.

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Diego Ramirez

•8M

Thanks for the explanation! So if I'm understanding correctly, as individuals (we're an S-corp, so income passes through to us as individuals), we don't get that nice 50% deduction that C-corps get? Does that mean we're potentially paying our full marginal tax rate on this GILTI income? That seems really high compared to the effective 10.5% for C-corps. And for the foreign tax credit part - can individuals also claim the 80% of foreign taxes paid against GILTI, or is that only for C-corps too?

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Anastasia Sokolov

•8M

You've hit on exactly why GILTI can be problematic for pass-through entities and individual taxpayers. Yes, individuals (including S-corp shareholders) don't automatically get the 50% deduction that C-corporations enjoy, which means GILTI could potentially be taxed at your full marginal tax rate, which could be as high as 37%. Regarding the foreign tax credit, individuals can claim foreign tax credits for taxes paid on GILTI, but the 80% limitation does apply. However, the way GILTI income is categorized for foreign tax credit purposes is different for individuals versus corporations, which can make it more difficult to fully utilize those credits efficiently.

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Sean O'Connor

•8M

I went through this exact GILTI headache last year with my consulting business that has operations in Europe. After endless IRS publications and conflicting advice, I finally found helpful guidance using https://taxr.ai to analyze my international business structure. They have specific insights on GILTI calculations that cleared up my confusion. The service helped me understand how my specific business structure affected my GILTI calculations and identified a Section 962 election that I didn't know could help me. Their system flagged that for individual shareholders of foreign corporations, making a Section 962 election allows you to be taxed similar to a C-corporation on GILTI income, essentially giving you access to that 50% deduction and 80% foreign tax credit that would otherwise only be available to C-corps.

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Sean O'Connor

•8M

The Section 962 election doesn't require restructuring your business. It's simply an election you make on your tax return that allows you as an individual shareholder to be taxed as if you were a corporation on certain types of foreign income, including GILTI. It can help mitigate the higher individual tax rates, especially if your foreign operations are in higher-tax jurisdictions. What impressed me about the service was that it wasn't just generic information. They analyzed my specific situation, including the countries where I have operations, the type of income being generated, and my overall tax picture. They identified that my European operations were in countries with tax rates that would interact favorably with this election.

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Zara Ahmed

•8M

Just wanted to follow up about my experience with taxr.ai after trying it for my GILTI calculation issues. I was initially looking for any solution to make sense of my international tech consulting tax situation, and it actually delivered. Their system helped me understand how the Section 962 election would work for my specific situation with Asian clients and operations. What really helped was seeing a side-by-side comparison of my tax liability with and without the election, broken down by country where I have income. They also identified that because one of my operations is in Singapore (with a lower tax rate), I needed a different approach than for my Japanese income (higher tax rate). This kind of specific analysis for GILTI calculations was exactly what I needed. Beyond the Section 962 election, they helped me understand how to properly categorize my foreign income for the most efficient foreign tax credit utilization. This alone saved me thousands in taxes that my previous accountant had missed.

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Nia Johnson

•8M

If you're dealing with GILTI tax issues, you probably know the frustration of trying to get answers from the IRS on complex international tax questions. I spent WEEKS trying to reach someone at the IRS who actually understood GILTI rules to confirm my calculations before filing. Always busy signals or 2+ hour holds. I finally used https://claimyr.com to get through to an IRS agent who specialized in international tax. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c - basically they hold your place in the IRS phone queue and call you when an agent picks up. Finally got my GILTI questions answered by someone who actually knew what they were talking about instead of getting transferred around endlessly.

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Nia Johnson

•8M

They don't just call for you - they use some kind of system that holds your place in the queue and continuously redials when there are disconnects (which happen all the time with IRS calls). When they finally get through to an agent, they call you and connect you directly. You're the one who actually talks to the IRS. The difference is they have the technology to stay in the queue without you having to sit there listening to hold music for hours. I was skeptical too until I tried it. I used to try the "call at off-peak hours" strategy too, but with the constant disconnects and transfers, I'd waste entire mornings and still not get through to the right department.

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Luca Conti

•8M

I'm eating my words about Claimyr. After dismissing it, I got desperate when my accountant and I had a critical question about how to report foreign tax credits against my GILTI inclusion. I tried the service, and within 45 minutes (while I was working on other things), I got a call connecting me to an actual IRS international tax specialist. The agent walked me through how to properly allocate my foreign taxes to maximize my credit against GILTI income, explaining how to handle the fact that some of my foreign operations are in low-tax jurisdictions while others are in high-tax ones. This was information I couldn't find clearly explained anywhere online and completely different from what my accountant initially thought. What was most valuable was being able to document this conversation (got the agent's ID number) for penalty protection in case of audit. For complex international tax issues like GILTI, having documented IRS guidance specific to your situation is gold.

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Aisha Abdullah

•8M

We made that election last year. It was definitely worthwhile for our German subsidiary where the effective tax rate was about 28%. Essentially allowed us to exclude that income entirely from GILTI calculations. But there's a caveat - you have to make the election for ALL your CFCs, so your Malaysian income would still be subject to GILTI if its effective rate is below the threshold. The calculations get super complex because you have to determine the effective foreign tax rate at the tested unit level. Worth talking to a specialist who's done this before.

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Yuki Tanaka

•8M

GILTI itself doesn't have industry-specific rules, but it definitely hits tech and software companies harder because of how it targets returns on intangible assets. Since your business model is centered around IP, you'll likely have a higher GILTI inclusion than businesses with lots of foreign tangible assets (like manufacturing). The qualified business asset investment (QBAI) exemption that reduces GILTI only applies to tangible assets, not IP assets. That's why many software companies get hit particularly hard - they have high foreign income but low tangible asset bases offshore.

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