
With a few compliance seasons in our rear view mirror after the enactment of the Tax Cuts and Jobs Act of 2017 (TCJA or “Tax Reform”), there is no better time for individuals to explore their options to create tax efficiencies.
Leaving the complex tax code definitions aside, a pressure point arose after Tax Reform with GILTI. This new income inclusion arose for both individuals and US Corporations, yet US Corporations are afforded direct relief from the income inclusion through a 50% GILTI deduction and Foreign Tax Credits (FTC). Not to mention the corporate tax rate of 21% compared to the highest individual tax rate of 37%.
When an individual makes a Section 962 election they are electing to be taxed as a corporation for purposes of Subpart F and GILTI inclusions. The benefit of this election is that it affords individuals the same 50% GILTI deduction and FTC that C corporations are allowed, as well as the corporate tax rate of 21% versus the 37% for individuals. Understandably, this election has become popular due to GILTI and Tax Reform.
Author: Saira Fida, CPA, sfida@withum.com
Get news updates and event information from Withum
Subscribe