Floor Plan Interest Deduction

As a way of background the tax cuts and jobs act of 2017 tcja limits the amount of business interest that can be deducted to the sum of 1 the taxpayer s business interest income for the year 2 30 of the taxpayer s adjusted gross income for the year and 3 the amount of floor plan financing interest for the year floor plan carve out.

Floor plan interest deduction. 163 j for tax years beginning after dec. The inclusion of floor plan interest financing in the deduction allows dealers to continue to deduct the interest paid on secured financing that many dealerships require to remain in business even though the interest may exceed or greatly exceed 30 percent of the taxpayer s annual taxable income. Floor plan financing interest expense is interest paid or accrued on floor plan financing indebtedness. While the floorplan interest will remain fully deductible taxpayers with over 25 million of average gross receipts and floorplan interest will be prohibited from taking bonus depreciation on any assets.

The taxpayer s business interest income. Business interest expense that exceeds this limitation is disallowed and carried forward. Floor plan financing indebtedness is indebtedness that is used to finance the acquisition of motor vehicles held for sale or lease and that is secured by the acquired inventory. Under the tax reform rules passed in 2017 the deduction for net business interest expense was generally limited to 30 of a dealership s adjusted taxable income plus 100 of floor plan financing interest expense.

The taxpayer s floor plan financing interest expense.