Business interest expense in a tax year is limited to 30% of the taxpayer’s __________ for the year.
Understand the Problem
The question is asking about the tax rules regarding business interest expense, specifically how it is limited in relation to a taxpayer's financial metrics for the tax year.
Answer
Adjusted taxable income (ATI).
The final answer is adjusted taxable income (ATI).
Answer for screen readers
The final answer is adjusted taxable income (ATI).
More Information
Under the Tax Cuts and Jobs Act (TCJA), business interest expense deductions are generally limited to 30% of a taxpayer's adjusted taxable income (ATI). This limitation was put in place to prevent excessive interest deductions and ensure that businesses pay a fair share of taxes.
Tips
A common mistake is confusing adjusted taxable income with gross income or net income. Adjusted taxable income is a specific tax term used in the calculation of this limitation.
Sources
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