Floor Plan Interest Credits

30 or 50 for 2019 and 2020 as amended by the cares act of the taxpayer s adjusted taxable income ati.

Floor plan interest credits. For example a dealer might be able to borrow 10 million over the year to purchase 300. Floor plan lenders include local and regional banks large national banks and financing companies owned by the manufacturing companies like toyota financial or ford credit. Many major banks offer the floor plan arrangement to its larger retail customers. Floor plan financing interest expense sec.

163 j for tax years beginning after dec. Below are answers to some basic questions about the limitation on the deduction for business interest expense also known as the section 163 j limitation prior to the 2017 tax cuts and jobs act tcja section 163 j of the internal revenue code applied only to certain interest paid or accrued by corporations. 163 j rules which covered so called earnings stripping and denied a corporation s interest deduction for disqualified interest to the extent it had excess interest expense in a year that its debt to equity ratio was greater than 1 5 to 1. However the tcja significantly changed the section 163 j limitation.

For example automobile dealerships utilize floor plan financing to run their businesses. So how does floor plan financing work. Much like a credit card a floor plan financing company extends a line of credit to a car dealer. The money borrowed from the bank collects interest and one has the choice to either make a minimum payment or pay off the balance in full when the bill is due.

The length of time that the floor plan financing indebtedness applies is for each individual tax year where the trade or business received benefit from the floor plan financing interest. 31 2017 business interest expense deductions are limited to the sum of. The taxpayer s floor plan financing interest expense. Also the major automobile manufacturers in the united states created gmac ford motor credit co.

The loans are often made with a one year term and based on an aggregate budget. This means that floor plan financing indebtedness needs to be calculated annually for each tax year after december 31 2017.