Screen whether section 163(j) limits the deduction for business interest
Key facts
- Human involvement
- YellowClose supervision
- How AI is used
- List business interest expense, business interest income, and whether the taxpayer is an exempt small business or an excepted trade. Do not compute the limitation amount. Leave adjusted taxable income to the lawyer.
- What the lawyer must review
- 26 U.S.C. § 163(j) provides that the deduction for business interest shall not exceed the sum of the taxpayer's business interest income, 30 percent of adjusted taxable income, and the floor plan financing interest the subsection includes. The IRS FAQ states the same three-part sum and says that, for taxable years beginning after December 31, 2017, the limitation applies to taxpayers with business interest expense other than certain small businesses that meet the gross receipts test in section 448(c). The FAQ says that test uses average annual gross receipts of $25 million or less in the previous three years, adjusted for inflation: $30 million for 2024, $31 million for 2025, and $32 million for 2026. Employee services, certain electing real-property and farming businesses, and certain regulated utilities are excepted.
- Written for / version
- United States versionUS
Who does what
| Role | What they do |
|---|---|
| Assistance | Consider narrowly defined preparation support after confirming the tool’s capability and permitted scope. |
| Lawyer | Set the scope, supervise the work closely, verify every part relied on, resolve omissions and exceptions, and approve the exact output. |
Checklist
- Calculate operative dates independently from the current rule and actual triggering event. Check exceptions and record the verified deadline.
- Verify the applicable jurisdiction and the version of each relevant law, rule or instrument in force at the material time.
- Confirm the output against the client’s instructions and the complete relevant source material, including omissions or contradictions.
- Resolve exceptions and record the responsible lawyer’s approval of the exact output and intended use.