IRS guidance addresses new tax law’s limits on business interest deductions

The US IRS today issued guidance on the new cap on large businesses’ interest deductions, enacted in the Tax Cuts and Jobs Act in December 2017. The new rules will be incorporated into proposed tax regulations, the Service said.

Notice 2018-28 addresses newly amended section 163(j) of the tax code, which limits the interest deduction for large businesses to the amount of interest income plus 30 percent of the business’ adjusted taxable income.

The new notice addresses the limits as applied to corporations and to consolidated groups. It also clarifies the treatment of interest disallowed and carried forward under section 163(j) prior to enactment of the recent tax legislation.

The notice also states that partners and S corporation shareholders can not inappropriately “double count” the business interest income of a partnership or S corporation.

The IRS requests taxpayer feedback on the new rules and on what additional guidance is needed in this area.

 

 

 

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