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The Internal Revenue Service (IRS) issued final regulations regarding the provision of the Tax Cuts and Jobs Act (TCJA) that limits the deduction for business interest expense, including basic statutory amendments made by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
In these final regulations, the IRS clarified that for tax years beginning after Dec. 31, 2017, business interest expense deductions are generally limited to the sum of:
The business interest expense deduction limitation does not apply to certain small businesses whose average gross receipts are $25 million or less (indexed to $26 million for 2019) for the previous three tax years, electing real property trades or businesses, electing farming businesses and certain regulated public utilities.
A real property trade or business, or a farming business may elect to be excepted from the business interest expense limitation. However, taxpayers cannot claim the additional first-year depreciation deduction for certain types of property held by the electing trade or business.
Along with these final regulations, the IRS issued additional guidance related to the business interest expense deduction limitation, including:
For more information about this and other TCJA provisions, contact Doeren Mayhew’s tax advisors today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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