IRS Form 8993, which calculates certain deductions available to eligible corporations with qualifying foreign-derived income and income connected to controlled foreign corporations. An important update: the IRS’s published 2025 instructions describe the existing FDII and GILTI framework, while the IRS has also released a draft 2026 Form 8993 reflecting changes to the terminology and calculations. Businesses should use the final form and instructions applicable to their tax year.

What Is IRS Form 8993?

Businesses that earn income from international customers or own foreign companies may have additional federal tax considerations when preparing their corporate income tax returns. One important form is IRS Form 8993, which is used to calculate certain deductions under Section 250 of the Internal Revenue Code.

Historically, Form 8993 has covered deductions associated with Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI). These rules were designed to address certain income earned by domestic corporations from qualifying foreign sales and services, as well as certain income inclusions involving controlled foreign corporations.

For tax years beginning in 2026, federal legislation has changed parts of this framework. The IRS’s draft 2026 Form 8993 uses updated terminology, including Foreign-Derived Deduction Eligible Income (FDDEI) and Net CFC Tested Income (NCTI). Businesses should check the final form and instructions for the tax year they are filing. <Cite refs={[“turn456217search0″,”turn456217search22”]}/>

Who May Need to File Form 8993?

Under the published instructions for the 2025 version, Form 8993 is generally used by eligible domestic corporations and certain U.S. individual shareholders of controlled foreign corporations who make a Section 962 election.

Eligible corporations generally include domestic C corporations that meet the applicable requirements. The deduction is not generally available to S corporations, regulated investment companies (RICs), or real estate investment trusts (REITs).

Businesses that may need to evaluate Form 8993 include:

• U.S. corporations selling qualifying goods to foreign customers.
• Domestic corporations providing qualifying services to customers or property located outside the United States.
• Eligible corporations with income inclusions connected to controlled foreign corporations.
• Certain U.S. shareholders who make a Section 962 election.
• Businesses that receive international tax information through partnerships or other entities.

Not every business with foreign customers qualifies for a deduction. Eligibility depends on the type of income, the customer, where the goods or services are used, allowable deductions, and the tax year involved. <Cite refs={[“turn456217search0″,”turn456217search1”]}/>

What Is Foreign-Derived Income?

Under the historical FDII rules, qualifying income could arise when a domestic corporation sold property to a foreign person for foreign use or provided services to a person, or with respect to property, located outside the United States.

For example, imagine a U.S. corporation manufactures products and sells them to an unrelated customer in another country. If the transaction satisfies the applicable foreign-use requirements and the other statutory conditions, some of the corporation’s income may qualify for the relevant deduction.

A U.S. company that provides certain services to overseas customers may also need to examine whether the income qualifies.

However, simply sending an invoice to a foreign address does not automatically make income eligible. Businesses must establish that the transaction satisfies the applicable requirements and maintain supporting records.

The rules can be particularly complex when transactions involve related foreign companies, distributors, intellectual property, or services performed across multiple countries.

What Is GILTI or Net CFC Tested Income?

GILTI was the historical name for a set of rules requiring certain U.S. shareholders of controlled foreign corporations to calculate an income inclusion for U.S. tax purposes.

For example, a U.S. corporation may own a foreign subsidiary that earns business income. Depending on the ownership structure and applicable rules, the U.S. shareholder may have an income inclusion even if the subsidiary does not distribute all its profits.

Form 8993 has historically been used to calculate the potential Section 250 deduction associated with qualifying GILTI amounts. The 2026 draft form reflects updated terminology and calculations associated with NCTI.

These rules are different from ordinary foreign dividend reporting. The income inclusion, foreign tax treatment, and potential deduction depend on the applicable tax provisions and the taxpayer’s circumstances. Businesses should coordinate Form 8993 with other relevant international tax forms, including Form 8992 where applicable. <Cite refs={[“turn456217search0″,”turn456217search22”]}/>

How Is IRS Form 8993 Completed?

The exact steps depend on the form version and tax year. The following overview describes the general purpose of the historical 2025 form and should not be treated as line-by-line instructions for the 2026 draft.

Step 1: Gather the corporation’s financial information

Collect the corporation’s income statements, deductions, foreign sales records, service contracts, ownership information, and relevant international tax documents.

The business may need to distinguish domestic income from income connected with qualifying foreign sales or services.

Step 2: Calculate deduction-eligible income

The historical form begins with gross income and applies specified exclusions to determine deduction-eligible income. Expenses properly allocable to that income must also be considered.

The new 2026 draft uses a revised calculation structure, so businesses should not automatically transfer the previous year’s figures into the new form.

Step 3: Identify qualifying foreign-derived income

For the historical FDII calculation, the corporation identifies income associated with qualifying sales to foreign persons for foreign use and qualifying services connected with persons or property outside the United States.

Supporting evidence may include customer contracts, invoices, shipping documents, service agreements, and records establishing foreign use.

Step 4: Coordinate foreign corporation income

If the corporation has a qualifying income inclusion related to a controlled foreign corporation, the relevant calculation must be coordinated with the applicable international tax reporting.

The historical form used the GILTI amount calculated through Form 8992. For 2026, taxpayers must review the updated law and final form instructions to determine the appropriate NCTI calculation and related reporting.

Step 5: Apply the deduction and taxable-income limitations

The amount of the deduction is not necessarily equal to the total qualifying income. The applicable deduction percentage, taxable-income limitation, and other statutory requirements must be considered.

The calculation can involve several schedules and supporting workpapers, especially for corporations with multiple foreign transactions or subsidiaries.

Step 6: Attach the form to the appropriate return

Under the published instructions, Form 8993 is attached to the applicable income tax return and filed by that return’s due date, including extensions. Businesses should follow the instructions for the specific tax year and return type. <Cite refs={[“turn456217search0″,”turn456217search1”]}/>

Important Form 8993 Changes for 2026

The 2025 legislation changed aspects of Section 250. The IRS’s December 2025 instructions explain that certain income and gains from sales or other dispositions of intangible property and certain depreciable, amortizable, or depletable property are excluded from deduction-eligible income for transactions occurring after June 16, 2025, subject to the applicable rules.

The IRS has also released a draft December 2026 Form 8993 with revised terminology and a different calculation layout. Because a draft is not the same as a final filing form, taxpayers preparing a 2026 return should verify the final published version and instructions before calculating or claiming a deduction. <Cite refs={[“turn456217search0″,”turn456217search22”]}/>

Common Mistakes to Avoid

Businesses should be careful to avoid these common problems:

• Assuming all international sales qualify for a deduction.
• Failing to document where goods are used or services are provided.
• Confusing Form 8993 with Form 8992 or other international tax forms.
• Using an outdated form or calculation method.
• Overlooking expenses that must be allocated to relevant income.
• Ignoring the taxable-income limitation.
• Failing to maintain documentation for related-party transactions.

Accurate records and early tax planning can help businesses identify potential issues before their returns are due.

How AIM Financial Can Help With Business Tax Preparation

International tax reporting can be complicated, especially when a company earns income from foreign customers or owns interests in overseas corporations. Understanding which deductions may apply—and which records are needed to support them—is an important part of preparing an accurate federal tax return.

AIM Financial assists taxpayers with organizing tax information and addressing their tax preparation needs. If your business is located in Grand Rapids, Kentwood, Wyoming, or elsewhere in West Michigan, contact AIM Financial to discuss your business tax preparation questions and determine what information may be needed for your filing.

Whether your company operates locally or conducts business internationally, reviewing your tax reporting requirements early can help you prepare for filing and identify questions that may require specialized guidance.

Contact AIM Financial for business tax preparation assistance and help organizing the information needed for your federal tax return.

Disclaimer: This article is for general educational purposes and is not individualized tax or legal advice. Form 8993 eligibility and calculations depend on the tax year, business structure, transactions, and current law. Always consult the final IRS form and instructions applicable to your filing year.