Floor Plan Interest 163 J

Floor plan financing interest expense is also business interest.

Floor plan interest 163 j. Floor plan financing interest expense. New section 163 j limits the taxpayer s annual deduction of interest expense to the sum of. The taxpayer s business interest income. Floor plan financing interest expense is not subject to the section 163 j limitation.

Tax law amended section 163 j to disallow a deduction for net business interest expense of any taxpayer in excess of 30 of a business s adjusted taxable income plus floor plan financing interest. Section 1 163 j 1 b 20 of the proposed regulations provides additional information on what constitutes interest under section 163 j. The section 163 j limitation allows floor plan financing interest to be fully deducted but prevents the dealership from accelerating deductions methods with 100 percent bonus depreciation. 163 j for tax years beginning after dec.

Aggregation could provide a benefit to auto dealerships in their ability to combine the operating business self rental property and other similar businesses. In general it limits a taxpayer s interest expense deductions for a taxable year to the sum of 30 percent of adjusted taxable income ati and its business interest income. The taxpayer s floor plan financing interest expense. Definition of floor plan financing interest expense following the changes made to the statute discussed above the proposed regulations provide that certain business interest expense paid or accrued on indebtedness used to acquire an inventory of motor vehicles is deductible without regard to the irc 163 j limitation.

Certain taxpayers involved in the sale of motor vehicles may also be able to increase their section 163 j limitation by any floor plan financing interest expense. 1 business interest income 2 30 percent of the adjusted taxable income of the taxpayer and 3 the floor plan financing interest of the taxpayer for the taxable year. 31 2017 business interest expense deductions are limited to the sum of. 115 97 enacted december 22 2017 amended section 163 j to disallow a deduction for business interest when net business interest expense exceeds 30 of adjusted taxable income ati plus floor plan financing interest for taxable years beginning after december 31 2017.

Floor plan financing interest expense is interest on debt used to finance the acquisition of motor vehicles held for sale or lease where the debt is secured by the acquired inventory. 30 or 50 for 2019 and 2020 as amended by the cares act of the taxpayer s adjusted taxable income ati. Floor plan financing interest expense sec.