Limit on Deduction of Business Interest Expense

A provision of the Tax Cuts and Jobs Act (TCJA) places a limitation on the amount of business interest expense which can be deducted beginning in 2018. In general, there is an exception to the limitation of business interest expense for most businesses which have annual gross receipts of less than $25 million over the prior three years. For those businesses which are subject to the limitation, their allowed business interest deduction may be capped. The calculation of the limitation considers the businesses’ interest income, adjusted taxable income and financing options.

In addition to the exception for businesses which have less than $25 million in annual gross receipts, there are also exceptions to the interest expense limitation for many service-based businesses.

Please contact us for more details if you feel that your business may be affected by the business interest expense limitation.

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