NEW 2018 GILTI Tax On US Owners of Controlled Foreign Corporations

For 2018 and beyond if you own 10% or more of a Controlled Foreign Corporaton (More than 50%

owned by US taxpayers) you must pay a GILTI tax (that is the real nickname of this tax) on part of the corporations net income even though it is not distributed to you.  This is a modification of the Subpart F rules which causes owners (US corporations, individuals, partnerships, etc) to pay tax on earnings of controlled foreign corporations. The rules are complex and may catch many expatriate small business owners by surprise  This tax is different than the Section 965 tax you paid one time for 2017.

If you want to know more the IRS draft form and initial draft instructions are below which can be downloaded in pdf format:

INSTRUCTIONS FOR FORM 8992 -draft

FORM 8992 - draft

If you want to take steps to deal with this tax before year end or need other assistance email us at ddnelson@gmail.com

The tax rules have changed significantly for 2018.  You no longer get a dependents deduction for yourself, your spouse or your children or other dependents. You do get a larger standard deduction though which may offset the loss of the dependents deduction.  The new standard deductions (which is in addition to any foreign earned income exclusion you claim on form 2555) is below. Due to these higher amounts the advantages of owning a home and the deduction of mortgage interest and state property taxes may be lost and well as loss of ability to deduct medical expenses and charitable expenses.  All of these deductions must exceed the standard deduction to achieve any benefit from these deductions.

2018 Standard Deduction Amount

Filing Status:	Deduction Amount:
Single	$12,000
Married Filing Separately	$12,000
Married Filing Jointly	$24,000
Head of Household	$18,000
Personal Exemption	$0