Business Interest Expense Deduction Limitations for Partnerships and Their Partners

Transactions involving the disposition of partnership property or partnership interests can trigger rules that limit business interest expense deductions. Section 163(j) of the Internal Revenue Code generally limits the deductibility of a partnership’s business interest expense (BIE) to an amount equal to its business interest income (BII) and 30% of its adjusted taxable income (ATI). Many taxpayers may be familiar with the timing provision that allowed a beneficial addback (the “Addback”) to ATI for depreciation, depletion, and amortization (DD&A) during the 2018 through 2021 tax years. However, taxpayers may be less familiar with the requirement that ATI be reduced by the Addback if the partnership disposes of its property or a partner disposes of their partnership interest.

Read now »

Related Content

• I.R.C. Section 163(j): Proposed and Final Regulations and CARES Act Modifications ExplainedLearn about the BIE deduction which is generally limited to the sum of a taxpayer's BII, 30% of ATI (50% under the CARES Act for taxable years beginning in 2019 and 2020) and floor-plan financing interest. Taxpayers use Form 8990, Limitation on BIE Under Section 163(j), to calculate and report their deduction and the amount of disallowed BIE that can be carried forward to the next taxable year.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

• Tax Key Legal Developments Tracker (Federal)
  Stay informed on new developments: 
  • Business Entities. IRS and Treasury correct final regulations (T.D. 9969) published in the Federal Register on December 9, 2022. The correction contains final regulations that except certain partnership-related items from the centralized partnership audit regime created by the Bipartisan Budget Act of 2015, and sets forth alternative rules that will apply to the examination of excepted items by the IRS. Treatment of Special Enforcement Matters; Correction, T.D. 9969, 88 Fed. Reg. 755 (Jan. 5, 2023); 88 Fed. Reg. 756 (Jan. 5, 2023).
  • Practice, Procedure and Controversy. IRS updates procedures for furnishing technical advice thereby superseding  Proc. 2022-2. Rev. Proc. 2023-2.
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts. 
• The Practical Guidance Journal Climate Change Special Edition features guidance on insuring for climate change, renewable energy initiatives, and a guide for public and private projects related to sea level rise.
• Legal Developments provide the latest updates and analyses of emerging topics impacting your practice area. Visit the Legal Developments page to see the latest topics, which also include breaking legal news and related Practical Guidance content. 
• Listen Up! The Practical Guidance and Law360 Podcasts Resource Kit features interviews with industry-leading attorneys on cutting edge issues in the law: NFTs, Cannabis, COVID-19, and more.
• Check out the new Practical Guidance Author Center! Learn about the 1750+ leading attorney authors contributing to our 22 practice areas and find out how you can Become a Practical Guidance Author. 

• New and Recently Updated Practical Guidance Content
  • SECURE 2.0 Impact on Retirement Plan Compliance and Administration
  • Using Trusts to Hold and Sell Qualified Small Business Stock
  • KPMG report: Analysis and Observations on Initial Guidance on New 1% Stock Repurchase Excise Tax
  • KPMG report: Accounting Method Changes to R&E Expenses under Rev. Procs. 2023-8 and 2023-11
  • Tax Enforcement: A Spotlight on Complex Partnership Structures
  • IRS Delays $600 Payment Reporting Requirement for 1 Year
  • Top Federal Tax Cases of 2022

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+