By Brian E. Ravencraft, CPA, CGMA, Partner at Holbrook & Manter, CPAs
One provision of the 2017 Tax Cuts and Jobs Act (TCJA) that has generated considerable concern among business owners is the new limitation on deductions for business interest expenses.
Prior to the provision, interest paid on business loans or credit lines could be deducted as an ordinary business expense. One section of the Internal Revenue Code — Section 163(j) —limited the deductions for certain types of interest expense that some C corporations paid, but most businesses were able to fully deduct business interest expense in the year it was accrued or paid.
The TCJA significantly changed that. The act expanded Section 163(j) to apply to all types of business interest expense, and it broadened the section’s scope to encompass all businesses, including pass-through entities such as partnerships, S corporations, and sole proprietorships.
Fortunately, many businesses — particularly small businesses — are still exempt from the Section 163(j) limitation.… Continue readingRead More »