New U.S. Tax Law Gives Big Breaks to Exporting Companies

Big Changes in Taxes for Exporters

A new tax law in the U.S. is making life easier for companies that sell products to other countries. These companies are called exporters, and they’re getting a big tax break.

This change is great news for many large companies. But it also helps smaller businesses that sell outside the U.S. If your company exports goods, you could be paying less in taxes very soon.

Let’s break it down in simple terms.

What Changed in the Tax Law?

The new law gives tax relief to companies that earn money from selling their products overseas. Before, companies had to pay a higher tax rate on foreign sales. Now, the law lowers that tax rate for certain kinds of income made from exports.

This kind of income is called foreign-derived intangible income (FDII). It might sound like a big term, but it just means money a company earns from selling or licensing products or services to customers in other countries.

With this new law, companies can:

• Pay lower taxes on export income
• Save more money for growth
• Stay more competitive with companies in other countries

Who Benefits From the New Tax Break?

Some of the biggest winners are large industrial companies. These companies make big machines, tools, or parts and sell them all over the world.

Here are two examples:

• Boeing – They build airplanes that are sold worldwide.
• Caterpillar – They make tractors and heavy machines used in construction.

Both of these companies do a lot of business outside the U.S. That means they will now pay fewer taxes on those foreign sales.

But it’s not just the big guys who benefit.

Small and mid-sized businesses that sell goods overseas can also see big savings. If your business sells tools, equipment, tech, or even digital services to customers outside the country, this tax law might help you too.

Why Is This Good for U.S. Businesses?

This change comes at a time when many companies are competing with businesses in other countries. Some of those countries have lower tax rates. That can make it hard for U.S. exporters to keep up.

Now, with this tax break:

• U.S. companies can lower their prices
• They can invest more in research and workers
• They can build more products and hire more people

This gives American businesses a better chance to grow and win more global customers.

How Much Can Companies Save?

The exact savings depend on how much a company exports. But for companies with lots of overseas sales, the tax savings can be huge.

For example:

• A company that earns $100 million in export income might save millions in taxes under the new law.
• Even a small business making $1 million in foreign sales could save thousands.

That money can be used for equipment, marketing, or hiring new workers. It’s a way to reinvest in the business.

Will This Help the U.S. Economy?

Yes, it could!

When companies save money on taxes, they often spend that money on things like:

• Hiring more workers
• Expanding their buildings
• Improving their products
• Paying better wages

All of these things help the U.S. economy. It means more jobs and stronger businesses.

Also, when U.S. products are sold more competitively around the world, it brings more money into the country. That helps balance trade and supports long-term growth.

What Should Exporting Businesses Do Now?

If your business sells products or services outside the U.S., this is a great time to check your tax plan.

Here’s what you can do:

1. Talk to a tax expert – Ask how the new law might apply to your company.
2. Look at your sales – See what percent of your income comes from foreign buyers.
3. Keep good records – The IRS may ask for proof that the income came from exports.
4. Think ahead – Plan how you can use the savings to grow your business.

A Quick Example

Let’s say you own a small company that makes custom tools. You have buyers in Canada and the UK. Last year, you earned $500,000 from those foreign buyers.

Under the old tax rules, you paid the full corporate tax rate on that money. Now, with the FDII deduction, you might only pay a portion of that rate—meaning you keep more of your profit.

That’s money you can use to buy better tools, train workers, or advertise to new markets.

Why This Matters to You

Even if you’re not an exporter, this new tax law could still matter to you.

• If you work for a company that exports, it could mean more job security.
• If you're a business owner, you might explore selling overseas for the first time.
• If you're an accountant or advisor, your clients will need help understanding the changes.

The bottom line? Lower taxes on export income can boost business, jobs, and the economy.

Final Thoughts

The U.S. government wants to help American businesses grow and stay strong in a global market. This new tax law is one way to do that.

By lowering the tax rate on foreign sales, the law rewards companies that bring money into the country. It helps large companies like Boeing and Caterpillar—but also opens the door for smaller exporters to thrive.

If you or your clients sell products overseas, now is a great time to look closer at how this law could work in your favor.

Want to learn more about how this affects your business?
Stay tuned—we’ll keep sharing updates that break down tax news in simple terms.