Form 5471 Schedule H and Schedule H-1: current E&P and CAMT-adjusted net income explained

For 2025 tax returns filed in 2026, Form 5471 Schedule H calculates a foreign corporation’s current earnings and profits for US tax purposes, while Schedule H-1 serves a different function – calculating a CFC’s adjusted net income or loss for certain corporate alternative minimum tax filers. The distinction matters because the two schedules use different rules, filers, and starting amounts.

The IRS issued its current Form 5471 instructions in December 2025. As of October 2026, the IRS has also posted draft 2026 Form 5471 materials reflecting post-2025 international tax changes, including the move from GILTI terminology to net CFC tested income. Those 2026 changes do not rewrite the 2025 Schedule H calculation discussed here.

What is Form 5471 Schedule H? A plain-English overview

For tax year 2025 returns filed in 2026, Form 5471 Schedule H reports a foreign corporation’s current-year earnings and profits, or E&P, for US tax purposes. The IRS requires the schedule for specified Category 4 and Category 5a filers, with the current E&P amount ultimately reported on line 5c.

Schedule H begins with the foreign corporation’s book income and makes US financial- and tax-accounting adjustments required under Regulations section 1.964-1. The resulting current E&P is divided among applicable income categories and translated to US dollars on line 5d.

Schedule H translates a CFC’s foreign-book net income into US tax E&P by applying adjustments required under IRC section 964 and related regulations.

The IRS describes Schedule H on its official Form 5471 page as the schedule used to report current E&P for US tax purposes. TFX’s broader Form 5471 guide for US taxpayers with foreign corporations explains how that schedule fits within the full information return.

The following 4 functions summarize what Schedule H accomplishes:

• Starts with current-year net income or loss from the foreign corporation’s books.
• Reconciles book accounting to US GAAP and US tax accounting through lines 2a–2i.
• Calculates current E&P on lines 5a–5c and assigns it to general, passive, or section 901(j) categories.
• Converts line 5c to US dollars at the applicable average exchange rate on line 5d.

The Form 5471 Schedule H current earnings and profits describes this core function, but E&P is not the same as taxable income, financial-statement profit, or cash available for distribution.

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Key terms you must know before filing Schedule H

Three ownership concepts determine whether Form 5471 and its schedules apply: a US person, a US shareholder, and a controlled foreign corporation. For 2025, a US shareholder generally means a US person owning at least 10% of the foreign corporation’s vote or value, while a CFC generally requires more than 50% US-shareholder ownership.

The current IRS Form 5471 instructions contain the controlling filing-category definitions. TFX also explains the ownership tests in its controlled foreign corporation guide.

1. US person: For Form 5471 purposes, the term includes US citizens and residents as well as domestic corporations, partnerships, estates, and trusts where the applicable statutory definition is met.
2. US shareholder: Under section 951(b), this generally means a US person who owns, directly, indirectly, or constructively, at least 10% of the total combined voting power or 10% of the total value of a foreign corporation’s stock.
3. 10 percent shareholder: This phrase commonly refers to the same 10% vote-or-value threshold used in the US shareholder definition, though the relevant Code section and ownership-attribution rules must still be checked.
4. Controlled foreign corporation: A CFC generally exists when US shareholders collectively own more than 50% of the corporation’s vote or value after the applicable ownership rules are applied. A CFC exists when US shareholders collectively own more than 50% of a foreign corporation’s voting power or value under the applicable ownership rules.
5. Earnings and profits: E&P is a federal tax concept used for purposes including corporate distributions and the Subpart F limitation. It is not interchangeable with GAAP net income, foreign taxable profit, retained earnings on the statutory accounts, or cash.

Foreign corporation ownership can therefore create different reporting results depending on whether the taxpayer crosses 10%, more-than-50%, control, direct ownership, indirect ownership, or constructive-ownership tests.

Who must file Schedule H: filer categories explained

For 2025 Form 5471 filings, Schedule H is required in the IRS filing matrix for Category 4 and Category 5a filers. It is not a universal Category 5 schedule: Category 5b filers do not complete Schedule H for foreign-controlled CFCs, and the matrix does not require it from Category 5c filers.

TFX’s guide to foreign company tax reporting requirements provides additional context for these CFC reporting requirements.

The following 5 broad Form 5471 filer categories explain where Schedule H fits:

1. Category 1: Certain US shareholders of section 965 specified foreign corporations, divided into Categories 1a, 1b, and 1c.
2. Category 2: Certain US citizens or residents who are officers or directors when a US person acquires stock meeting the section 6046 ownership threshold.
3. Category 3: Certain US persons involved in specified acquisitions, dispositions, or changes in foreign corporation ownership.
4. Category 4: A US person who had control of a foreign corporation during the tax year – generally more than 50% of vote or value. Schedule H applies.
5. Category 5: Certain US shareholders of CFCs. Category 5 is split into 5a, 5b, and 5c. Schedule H applies to Category 5a, subject to the detailed exceptions.

 

 

The Form 5471 Schedule H instructions should therefore be checked against the filer-category matrix rather than assuming every shareholder who files Form 5471 also completes Schedule H.

Schedule H vs. Schedule H-1: what is the difference?

Schedule H and Form 5471 Schedule H-1 serve separate tax systems. Schedule H calculates current E&P under section 964 principles; the December 2024 Schedule H-1 calculates a CFC’s adjusted net income or loss for CAMT and is required only when the relevant US shareholder is an applicable corporation under section 59(k).

The phrase Schedule H-1 hybrid deduction accounts is not an accurate description of the current separate schedule. Hybrid deduction accounts remain relevant to Form 5471 – for instance, Schedule I line 9 addresses them for certain domestic corporate shareholders – but the current Schedule H-1 is a CAMT schedule.

For 2025 filings, Schedule H measures E&P while Schedule H-1 reports CAMT-related adjusted net income or loss.

The decision rule is straightforward: Schedule H is an E&P schedule; Schedule H-1 applies only where a US shareholder is an applicable corporation for CAMT purposes.

 

This distinction also explains why an individual American expat who owns a foreign business can have a Form 5471 Schedule H obligation but normally will not have a personal CAMT Schedule H-1 requirement.

Schedule H: current earnings and profits – line-by-line walkthrough

Current Schedule H uses 5 main computational stages, not the 2a–2o and 3a–3o structure shown in the original brief. Line 1 starts with book income, lines 2a–2i make E&P adjustments, lines 3 and 4 total additions and subtractions, and lines 5a–5e report final E&P. 

TFX’s Form 5471 Schedule E guide is useful when reconciling the income-tax amounts referenced on Schedule H line 2g.

The following 5 stages follow the current 5471 Schedule H instructions:

1. Line 1 – current-year net income or loss per foreign books. This is the starting amount. If the foreign corporation keeps books in accordance with US GAAP in functional currency, the current instructions instead direct the filer to use the applicable GAAP amount from Schedule C.
2. Lines 2a–2i – E&P adjustments. These lines cover capital gains and losses, depreciation and amortization, depletion, investment or incentive allowances, statutory reserves, inventory, income taxes, foreign currency gains or losses, and other adjustments. Each line can contain additions or subtractions.
3. Line 3 – total net additions. Add the positive E&P adjustments identified in the line 2 categories.
4. Line 4 – total net subtractions. Total the negative adjustments needed to reconcile book income with US E&P principles.
5. Lines 5a–5e – current E&P and translation. Line 5a equals line 1 plus line 3 minus line 4. Line 5c divides current E&P among required income categories; line 5d converts the line 5c amount into US dollars at the average exchange rate.

 

 

How E&P adjustments work: common add-backs and subtractions

E&P adjustments convert financial-statement income into the federal tax measure required by Regulations section 1.964-1. On the current schedule, these changes are recorded within 9 adjustment categories on lines 2a–2i, and an adjustment can be positive or negative depending on the difference between the books and US rules.

TFX’s guide to Form 5471 Schedule J and accumulated E&P explains where current E&P moves after Schedule H.

The following 5 adjustments are among those a filer may encounter:

• Income taxes: Line 2g reconciles book income-tax expense or benefit with the tax amounts that properly affect E&P.
• Depreciation and amortization: Line 2b accounts for differences between book depreciation and depreciation determined under applicable US rules, including section 167 principles.
• Depletion: Line 2c captures differences between book depletion and the amount allowed for E&P purposes.
• Capital gains and losses: Line 2a adjusts book treatment where federal E&P principles produce a different result.
• Inventory or other accounting items: Lines 2f and 2i capture inventory adjustments and other differences that are not reported elsewhere.

Based on our client scenario at TFX: A CFC reports $500,000 of book profit. Assume the verified E&P adjustments are a $40,000 net addition for tax-accounting differences and a $25,000 net subtraction for depreciation and other adjustments. Current E&P would be $515,000 before any applicable DASTM adjustment: $500,000 + $40,000 − $25,000.

The actual direction and amount of each adjustment depend on the corporation’s accounting records, functional currency, assets, tax provision, and transactions. A foreign statutory deduction does not automatically produce the same E&P treatment in the United States.

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Schedule H-1: CAMT adjusted net income explained

The current Form 5471 Schedule H-1 is a CAMT schedule, not a hybrid-deduction-account worksheet. It starts from applicable-financial-statement income and makes adjustments under section 56A and related CAMT guidance before reporting the filer’s pro rata share of CFC adjusted net income or loss on line 5.

The older phrase " Form 5471 Worksheet H 1” should not be used as the name of the current form. The IRS’s separate December 2024 schedule is titled “Pro Rata Share of CFC Adjusted Net Income or Loss for Corporate Alternative Minimum Tax.”

A US shareholder completes this schedule only when it is an applicable corporation for CAMT purposes. The Form 5471 matrix identifies Categories 4, 5a, and 5b as potentially subject to H-1, but the footnote limits the requirement to applicable corporations.

TFX’s article on Form 8993 and corporate international deductions provides broader corporate international-tax context, although Schedule H-1 itself is governed by the CAMT rules.

For an individual expat shareholder, this distinction is particularly important: owning a CFC does not by itself turn the individual into an applicable corporation subject to CAMT.

Schedule H-1 line-by-line instructions

The current Form 5471 Schedule H-1 instructions use line 1, adjustment lines 2a–2m, line 3, line 4, and line 5. The schedule also records applicable financial statement currency and exchange rates, making it structurally different from both Schedule H and the former internal worksheets associated with other Form 5471 calculations.

The following 5 stages summarize the current Form 5471 Schedule H 1 instructions:

1. Items a–c – currencies and exchange rates. Identify the applicable financial statement currency and the rates used to convert AFS and functional currency amounts to US dollars.
2. Line 1 – applicable financial statement net income or loss. Enter AFS income and convert it to US dollars with the applicable weighted-average exchange rate where required.
3. Lines 2a–2m – CAMT adjustments. The current form covers mismatched financial-statement periods, consolidated financial statements, dividends, partnerships, effectively connected income, taxes, disregarded entities, depreciation, and other adjustments.
4. Lines 3 and 4 – adjusted net income or loss. Line 3 combines the adjustments, and line 4 combines line 1 with line 3.
5. Line 5 – filer’s pro rata share. Enter the filer’s pro rata share of line 4.

TFX’s Form 5471 Schedule Q guide covers a different CFC income-group schedule and should not be substituted for H-1.

How Schedule H connects to other Form 5471 schedules

Schedule H connects directly to Schedule J because Schedule J line 3 takes the applicable current-year E&P amount from Schedule H line 5c. Schedule H also sits alongside Schedule E, I, I-1, P, and Q, but each schedule has its own statutory purpose and should not be treated as a mechanical copy of Schedule H.

Schedule H supplies current E&P to Schedule J, while the remaining Form 5471 schedules separately report taxes, inclusions, PTEP, and CFC income groups.

The following 4 relationships are the most useful to understand:

• Schedule J: Receives Schedule H current E&P into the accumulated earnings and profits accounts.
• Schedule E: Reports foreign taxes paid or accrued and provides tax information that should reconcile with relevant Schedule H tax adjustments.
• Schedule I and I-1: Report shareholder-level subpart F items and CFC-level information for the section 951A computation.
• Schedules P and Q: Track PTEP and CFC income groups rather than merely repeating Schedule H balances.

See TFX’s Schedule P guide for previously taxed E&P for the PTEP side of this reporting chain.

The Schedule H Form 5471 relationship is therefore strongest with Schedule J. Treating Schedule H as the source of every downstream Form 5471 amount would overstate what the IRS forms actually require.

Schedule H and GILTI: the connection

For a 2025 tax year, Schedule H and the GILTI calculation concern the same CFC but measure different tax concepts. Schedule H determines E&P under section 964 rules, while section 951A tested income is computed separately and reported through Schedule I-1 and related GILTI forms. One should not be substituted for the other.

TFX explains the 2025 mechanics in its GILTI guide for US shareholders of CFCs.

For 2025, section 951A still uses the GILTI regime and its net deemed tangible income return component. Starting with taxable years beginning after December 31, 2025, Public Law 119-21 changes the statutory term to net CFC tested income and removes the QBAI-based deemed-return component.

That 2026 change is already visible in draft IRS materials: the draft 2026 Schedule I-1 is titled “Information for Net Controlled Foreign Corporation (CFC) Tested Income.”

For a 2025 section 951A computation, tested income exclusions and deductions still need to be computed under the 2025 rules. A Schedule H error can create inconsistencies across the return, but it does not automatically equal the same-dollar error in GILTI.

Subpart F income and its relationship to Schedule H E&P

Current E&P matters directly to subpart F income because section 952(c) limits a CFC’s subpart F income for the year by reference to current E&P, subject to later recapture rules. A CFC with little or no current E&P can therefore have a reduced current-year subpart F inclusion even when it has gross foreign base company income.

TFX’s analysis of subpart F income versus GILTI explains the broader distinction between those two inclusion regimes.

The following 3 common subpart F categories illustrate where the limitation can matter:

1. Foreign personal holding company income: Includes categories such as interest, dividends, rents, royalties, and specified gains, subject to statutory exceptions.
2. Foreign base company sales income: Can arise from certain related-party purchases or sales involving property produced and used outside the CFC’s country.
3. Foreign base company services income: Can apply to specified services performed for or on behalf of related persons outside the CFC’s country of organization.

A prior-year E&P limitation is not necessarily permanent. The IRS instructions state that excess E&P in a later year can cause previously limited subpart F income to be recaptured.

TFX’s guide to the section 962 election for individual CFC owners explains another layer that can change an individual shareholder’s treatment.

Get help with Form 5471 Schedule H

A Schedule H error can affect at least 3 connected areas – E&P reporting, subpart F calculations, and other Form 5471 schedules. A properly prepared return should reconcile the corporation’s books, Schedule H adjustments, applicable foreign taxes, and the schedules required for the filer’s specific Category 4 or Category 5 status.

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Common mistakes on Schedule H and how to avoid them

The most common Schedule H problems come from treating book profit as E&P, using the wrong adjustment line, or failing to reconcile connected Form 5471 schedules. The 2025 form has 9 line-2 adjustment categories, so using an outdated worksheet or unsupported book-to-tax shortcut can produce a materially incorrect E&P balance.

The following 6 errors deserve specific review before filing:

1. Using GAAP or statutory net income without E&P adjustments. Consequence: line 5a can materially overstate or understate current E&P.
2. Putting foreign tax adjustments on the wrong line. Current Schedule H uses line 2g for income-tax differences, not line 2a.
3. Using foreign depreciation without checking US E&P rules. Consequence: depreciation differences can distort both current E&P and later Schedule J balances.
4. Failing to reconcile Schedule H with Schedule E. Consequence: inconsistent tax amounts can leave the return internally unsupported.
5. Using the wrong currency methodology. Consequence: line 5d and other schedules may report inconsistent US-dollar amounts.
6. Treating Schedule H-1 as a hybrid-deduction worksheet. Consequence: an applicable corporation can omit required CAMT data or complete an obsolete calculation instead.

TFX discusses international return penalty issues in its Form 5471, 5472, and 8865 penalty-relief article.

The shorthand Form 5471, Sch. H or 5471 Sch. H should always refer back to the current IRS schedule rather than a prior-year worksheet or third-party template.

Penalties for incorrect or missing Schedule H

A person who fails to provide the information required under section 6038 can face a $10,000 penalty for each annual accounting period. If the failure continues for more than 90 days after an IRS notice, another $10,000 can apply for each 30-day period, subject to a $50,000 continuation-penalty cap for each failure.

An incomplete Form 5471 can be treated as a failure to furnish required information even when other schedules were submitted.

The IRS instructions also provide for a 10% reduction in foreign taxes otherwise available for credit under sections 901 and 960 for certain failures to furnish section 6038 information. Further reductions can apply after the 90-day notice period, subject to statutory limits.

The result depends on the particular reporting failure, filing category, statutory provision, and whether reasonable-cause relief is available. A taxpayer who discovers a missing or inaccurate Form 5471 should not assume that filing the omitted Schedule H by itself cures every late-filing issue.

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Functional currency and translation rules for Schedule H

Schedule H reports lines 1 through 5c in the foreign corporation’s functional currency, while line 5d converts current E&P to US dollars using the average exchange rate for the corporation’s tax year under section 989(b). Different currency rules apply to other items, including certain distributions of previously taxed earnings under section 986.

The following 4 currency points keep the Schedule H calculation aligned with other CFC reporting:

• Current E&P: Calculate Schedule H through line 5c in functional currency.
• US-dollar E&P: Translate line 5c to US dollars on line 5d using the applicable average exchange rate.
• PTEP distributions: Section 986(c) can produce foreign-currency gain or loss when previously taxed earnings are distributed.
• Cross-schedule consistency: Schedule J and other schedules must use the exchange-rate methodology required for their own lines rather than an arbitrary year-end rate.

 

 

The 5471 Schedule H instructions expressly use the IRS “divide-by convention” for exchange-rate reporting, so the display format itself also matters.

Schedule H in the context of the foreign tax credit

Schedule H can affect income amounts relevant to the shareholder’s international tax computation, but it does not by itself calculate the foreign tax credit. For 2025, CFC-level deemed-paid taxes under section 960 are determined through the applicable income and tax group rules, while Form 1116 primarily handles credits available to individuals.

TFX’s Form 1116 foreign tax credit guide explains how an individual claims eligible foreign taxes paid or accrued at the shareholder level.

A US individual does not automatically receive a credit on Form 1116 for income tax paid by a separate CFC. CFC-level deemed-paid taxes under section 960 are primarily a corporate-shareholder concept, although an individual making a valid section 962 election can bring deemed-paid-credit rules into the individual calculation.

Schedule H should therefore be reconciled with the foreign tax schedules, but current E&P is not a stand-alone foreign tax credit calculation.

For tax years beginning after December 31, 2025, Public Law 119-21 also increases the section 960(d) deemed-paid percentage associated with net CFC tested income from 80% to 90%. That change is a 2026 rule and should not be retroactively applied to a 2025 GILTI calculation.

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Form 5471 can require 10 or more schedules for a sole owner who falls into Categories 4 and 5a. If your Schedule H balance does not reconcile with the CFC’s books or connected schedules, identifying the difference before filing is easier than correcting a filed international information return later.

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Practical example: completing Schedule H for a CFC

A Schedule H calculation begins with actual book income and adjusts it under US E&P principles. In this $300,000 illustration, the final number changes because the corporation’s foreign tax and depreciation accounting differ from the amounts used to determine current E&P for Form 5471. The example is educational rather than a substitute for the CFC’s records.

Based on our client scenario at TFX: A US shareholder owns 100% of a Hong Kong trading company reporting $300,000 of book net income.

The following 4 steps show a simplified calculation:

1. Start with $300,000 of book net income. Report the applicable starting amount on Schedule H line 1.
2. Record a $45,000 net positive adjustment. Assume the company’s income-tax accounting requires this addition within the applicable line 2g reconciliation.
3. Record a $20,000 net subtraction for depreciation differences. Assume the US E&P calculation supports that adjustment on line 2b.
4. Calculate $325,000 of current E&P. $300,000 + $45,000 − $20,000 = $325,000 before any applicable DASTM adjustment. The amount then feeds the appropriate Schedule H line 5c category and, from there, Schedule J.

TFX’s discussion of specified foreign corporations and US shareholders gives additional context for CFC ownership.

The $325,000 figure does not automatically become the shareholder’s subpart F inclusion. Schedule I, section 952(c), the income’s character, applicable exceptions, ownership period, and other CFC rules must still be applied.

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FBAR and FATCA obligations that can accompany CFC ownership

Form 5471, FBAR, and Form 8938 are separate reporting regimes. An FBAR is required when a US person has a reportable financial interest in or signature authority over foreign financial accounts whose aggregate value exceeds $10,000 at any point in the calendar year; CFC ownership by itself is not the filing test.

TFX’s 2026 FBAR filing guide covers the FBAR reporting requirements in detail.

The following 3 points distinguish the filings:

• FBAR: The $10,000 aggregate threshold applies to reportable foreign financial accounts in which the US person has a financial interest or signature or other authority.
• Form 8938: Thresholds depend on filing status and whether the taxpayer qualifies as living abroad. A qualifying unmarried filer abroad starts at more than $200,000 on the final day or more than $300,000 at any time; joint filers abroad use $400,000 and $600,000.
• Form 5471: Uses corporation-ownership and filer-category tests rather than the FBAR $10,000 account threshold.

A taxpayer who files Form 5471 may benefit from special Form 8938 duplicate-reporting rules for assets already reported on another specified international information return, but the Form 8938 instructions should still be checked.

The same foreign business can also raise other IRS international forms issues, including Form 8621 where a separate investment qualifies as a passive foreign investment company. PFIC status is a different regime and should not be inferred merely from CFC ownership.

Catch up on unfiled Form 5471 returns

Missing Form 5471 for 1 or more prior years requires a facts-and-circumstances review before choosing a correction route. The Streamlined Foreign Offshore Procedures can help qualifying non-willful taxpayers, but Form 5471 omissions do not automatically qualify every filer for streamlined treatment.

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Schedule H filing deadlines and extension rules

Form 5471 and Schedule H are attached to the filer’s income tax return and share that return’s due date, including extensions. For a calendar-year individual filing a 2025 return, the regular date was April 15, 2026; qualifying US taxpayers abroad received an automatic filing extension to June 15, 2026.

TFX explains the underlying income-return reporting in its guide to reporting foreign income on Form 1040.

The following 3 deadline scenarios cover the most common cases:

• US-based calendar-year individual: Form 5471 attached to the 2025 Form 1040 was ordinarily due April 15, 2026. A timely Form 4868 could extend filing to October 15, 2026.
• Qualifying individual abroad: The automatic 2-month extension moved the filing date to June 15, 2026. Filing Form 4868 by that date generally extended the return to October 15, 2026.
• Corporate or other filer: Form 5471 follows the due date, including extensions, of the return to which it must be attached; the exact date depends on the filer’s return type and tax year.

An extension of the income tax return generally extends the attached Form 5471 filing deadline, but it does not eliminate tax-payment and interest rules that apply to the underlying return.

This is why the Schedule H 5471 instructions should be read alongside the filing rules for the return carrying Form 5471 rather than applying April 15 to every entity.

File your Form 5471 with TFX

A Form 5471 omission can carry a $10,000 section 6038 penalty, and a Category 4/5a sole owner can face numerous interconnected schedules. TFX prepares US expat returns with international information forms based on the taxpayer’s actual ownership, entity records, and filing category rather than a one-size-fits-all Schedule H worksheet.

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