Floor Plan Financing Interest Tax Reform

30 percent of adjusted taxable income and c floor plan financing interest.

Floor plan financing interest tax reform.

The lesser of i gain realized on sale or disposition of property or ii deductions for depreciation amortization or depletion taken for such property during a tax year beginning after 2017 and similar adjustments for sales or dispositions of property held by a partnership or member of a consolidated group upon. 10 30 2019 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 2017 tax reform act has significantly expanded accelerated depreciation methods under section 168 k bonus depreciation and section 179. Interest expense limitation deductions for net interest expense are limited for businesses whose gross receipts exceed 25 million to the sum of 1 business interest income 2 30 percent of a business s adjusted taxable income and 3 floor plan financing interest for the tax year.

Tax strategies bonus depreciation rules favor dealerships with floor plan financing interest. Auto dealers rejoice over preservation of 100 floor plan financing interest deduction by emily fiore and david blum on june 20 2018 posted in federal tax. So how does floor plan financing work. A business can deduct its business interest only to the extent of its business interest income plus 30 of business adjusted taxable income plus the business s floor plan financing income.

34 business interest expense exceeding the limitation amount can be carried forward indefinitely. For example automobile dealerships utilize floor plan financing to run their businesses. Much like a credit card a floor plan financing company extends a line of credit to a car dealer. Under the new act assets placed in service after september 27 2017 are now eligible for 100 bonus depreciation i e the entire cost of the assets can be deducted in the year it is placed in service.

Floor plan financing interest expense. The tax cuts and jobs act act made significant changes to the internal revenue code. Auto dealers rejoice over preservation of 100 floor plan financing interest deduction. 35 while the limitation applies to all business entity forms there are special rules for applying the.

The senate s version of the tcja proposed limiting the deduction for floor plan financing interest to the same 30 percent amount that other types of interest are subject but this change was not adopted in the final bill. As a practical matter nearly all auto dealers incur such floor plan financing interest. The section 163 j limitation is applied after other interest disallowance deferral capitalization or other limitation provisions.