Form 8993: Section 250 Deduction (IRS)

Form 8993 figures the section 250 deduction for two kinds of income. These are foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). The instructions say the deduction is for domestic corporations. It is not allowed to real estate investment trusts, regulated investment companies, or S corporations.

This post is general information from the December 2025 Form 8993 and its instructions. It does not say whether a corporation has FDII or GILTI. That depends on its sales and services to foreign persons and on its controlled foreign corporations.

Who must file

All domestic corporations must use Form 8993, the instructions say. It figures the section 250 deduction. U.S. individuals who make a section 962 election also use it. The deduction is allowed only to domestic corporations other than the excluded types. It is also allowed to section 962 electing individuals.

A corporation that is a partner counts its share of the partnership's items. The instructions say to attach a statement to Form 8993. The statement lists each partnership's name and employer identification number. It also lists the partner's share of QBAI, plus other FDDEI items.

The eight steps

The instructions list eight steps:

Determine deduction eligible income (DEI).
Determine the deemed tangible income return (DTIR), which is 10% of qualified business asset investment (QBAI).
Determine deemed intangible income (DII).
Determine foreign-derived deduction eligible income (FDDEI).
Determine the foreign-derived ratio.
Determine FDII.
If FDII and GILTI are more than taxable income, determine the FDII and GILTI reductions.
Determine the section 250 deduction.

Line 1 uses the amount from Form 1120, line 11. Line 6 is DEI, which is line 4 minus line 5. Line 8 is DII, which is line 6 minus line 7c. Line 19 is FDDEI, which is line 11 minus line 18.

The rates

The instructions say section 250 allows a deduction for tax years beginning on or after January 1, 2018. The rates apply to tax years before January 1, 2026. The deduction generally equals 37.5% of FDII plus 50% of GILTI. After that period, the instructions say the percentages drop to 33.34% and 40%.

The taxable income limit

If FDII plus GILTI is more than taxable income, the deduction is capped at taxable income. Lines 25 through 27 of the form figure the excess and the reductions. The FDII reduction is line 21 divided by line 23, times line 25.

Exclusions from deduction eligible income

Line 2 removes income items that are not deduction eligible. The instructions list these exclusions. They include amounts under section 951(a)(1) and section 951A, which is the GILTI inclusion. They also include financial services income and foreign branch income. They also include dividends from a controlled foreign corporation and domestic oil and gas extraction income. They also list certain gains. These include gains from selling intangible property. They also include gains from selling certain depreciable property. The sale must have happened after June 16, 2025. A sale includes a lease, license, or exchange, the instructions say. For those two exclusions, a lease or license is not a sale.

Corrections and documentation

If a Form 8993 is wrong, the instructions say to file a corrected form. File it with an amended return. Write "Corrected" at the top. Computer-generated forms need prior IRS approval. Some sales and services to foreign persons have documentation rules.

Foreign use means any use, consumption, or disposition outside the United States. Deals with related parties follow special rules under section 250(b)(5)(C).

A corporation with an interest in a controlled foreign corporation may also need Form 5471: Reporting Interests in Foreign Corporations. For a foreign tax credit, see Form 1118: The Foreign Tax Credit for Corporations. For the basic corporate return, see Form 1120: The Corporate Income Tax Return and Who Must File It.

Sources: Sources: IRS, Form 8993, Section 250 Deduction for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI) (Rev. December 2025) (https://www.irs.gov/pub/irs-pdf/f8993.pdf); Instructions for Form 8993 (Rev. December 2025) (https://www.irs.gov/pub/irs-pdf/i8993.pdf) This is general information, not advice about your specific return.

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