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Section 163(j) Business Interest Limitation Calculator

What is this money worth, or what does it cost, over time?

Deductible business interest and the carryforward from adjusted taxable income, interest income, floor plan interest and the small business exemption.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Deductible business interest
$310,000
Business interest allowed this year
Carryforward to next year
$110,000
Adjusted taxable income (ATI)
$1,000,000
Drawn to one scale
Deductible business interest$310,000
Carryforward to next year$110,000
Adjusted taxable income (ATI)$1,000,000
Interest deduction cap$310,000
All results
MeasureResult
Deductible business interest$310,000
Carryforward to next year$110,000
Adjusted taxable income (ATI)$1,000,000
Interest deduction cap
Interest income + 30% of ATI + floor plan interest
$310,000
StatusLimited: interest exceeds the cap
How this was worked out
Work shownrecomputed as you type
ATI = taxable income computed without business interest, NOL deduction, section 199A deduction and (after 2024) depreciation, amortization and depletion
Cap = business interest income + 30% x max(ATI, 0) + floor plan financing interest
Deductible = min(interest expense + carryforward, cap), or all of it if the gross receipts test is met
Carryforward = disallowed interest

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • ATI = taxable income computed without business interest, NOL deduction, section 199A deduction and (after 2024) depreciation, amortization and depletion
  • Cap = business interest income + 30% x max(ATI, 0) + floor plan financing interest
  • Deductible = min(interest expense + carryforward, cap), or all of it if the gross receipts test is met
  • Carryforward = disallowed interest

How it works

Section 163(j) limits the business interest deduction to business interest income, 30 percent of adjusted taxable income and floor plan financing interest. The 30 percent piece cannot go below zero. Interest over the cap is not lost: it is treated as business interest paid in the next year.

A taxpayer that meets the section 448(c) gross receipts test is exempt for the year, unless it is a tax shelter barred from the cash method by section 448(a)(3). A taxpayer that is not a corporation or partnership applies the test as if it were one. For tax years beginning after 2024, depreciation, amortization and depletion are added back in ATI again, which raises the cap for asset-heavy businesses. Business interest does not include interest capitalized under sections 263(g) or 263A(f). This tool does not model partnership allocations or the real property trade or business election.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Does the 30 percent apply to net interest or to interest expense?

The cap is business interest income plus 30 percent of ATI. Interest expense above that sum is limited.

How does the carryforward work?

Disallowed interest is treated as business interest paid or accrued in the next year and goes through the same limit again.

Who is exempt?

A taxpayer that meets the section 448(c) gross receipts test. The 2026 threshold is $32,000,000 of three-year average gross receipts.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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