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Generating Form 8990

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Intuit

Generating Form 8990

Before you start:

  • This article will help you enter information for Form 8990 Limitation on Business Interest Expense Under Section 163(j) in a Partnership, Individual or S-Corporate return.
  • Form 8990 is not currently supported in the Fiduciary module (Form 1041).
  • For more information, including 'who must file' and 'exclusions from filing', see the Instructions for Form 8990.

Note: Amount(s) entered print on Form 8990 only.  If Form 8990 computes that some or all interest expense is disallowed, the allowed interest expense must be manually prorated and then entered as interest in the affected areas of the return. Any computed excess business interest expense, excess taxable income, or excess business interest income will automatically flow to Schedule K and K-1. If the partnership is not subject to Section 163(j) limitations, but the partners are, Form 8990 will print as a worksheet and any business interest expense, adjusted taxable income, and business interest income will flow to Schedule K-1.

  1. Go to Screen 72, Limitation on Business Interest Expense.
  2. Check the box Partnership is subject to the section 163(j) limitation (code 17) if applicable.
    • Check the box if the taxpayer is subject to the section 163(j) limitation on business interest expense, at the Partnership level.
      A taxpayer is not required to file Form 8990 if the taxpayer is a small business taxpayer and does not have excess business interest expense from a partnership. A small business taxpayer is defined as: a taxpayer that is not a tax shelter and has average annual gross receipts of $25 million or less for the 3 prior tax years under the gross receipts test of section 448(c). See Form 8990 instructions for more information.
  3. Check the boxes listed under Partnership is Not Subject to Section 163(j) Limitation subsection, if applicable.
    • Partners could be subject to section 163 (j) limitation (code 20) - If the Partnership is not subject to section 163(j) limitations and may have partners that are subject to section 163(j) limitations, then select the box and make entries in this input screen. If an entry is made in this field, the program computes Form 8990, page 1 and prints the Partnership’s business interest expense, adjusted taxable income, and business interest income on Schedule K-1, Other Information.
      Note: If an entry is made in this field, Form 8990 will not print with the return. Instead, Form 8990, page 1 prints as a worksheet.
    • Carry amounts from the return to Form 8990 Worksheet (code 21) - Select the box to carry the amounts from the tax return to the Form 8990 Worksheet. This box should only be used when the “Not subject to section 163(j) limitations (if partner(s) are subject to section 163(j) limitations)” box is checked. If there is an entry in this box, the program carries the following amounts to the Form 8990 Worksheet.
      • Current year business interest expense, before the section 163(j) limitation
      • Taxable income before limitation on business interest expense
      • Business interest expense not from a pass-through entity
      • Depreciation, amortization, or depletion attributable to a trade or business
      • Loss or deduction from a pass-through entity
      • Income or gain from a pass-through entity
Note: If this box is selected the input fields (in this screen) that represent the items listed above can be used as overrides. The input fields are denoted with an asterisk. Enter -1 in these fields, as necessary, to set the amounts to zero.
  1. Complete all applicable fields;
    • Current year business interest expense, before the section 163(j) limitation* - Enter the business interest expense (not including floor plan financing interest expense or disallowed business interest expense carryforwards from prior years) that would have been deductible in the current year (or, with regard to passive activities, the amount that would have been taken into account before application of the passive loss limitation rules) without the application of section 163(j).
      Interest expense from an excepted trade or business should not be included.
      If a CFC group election has been made, enter the amount of the CFC’s allocable share of business interest expense.
    • Disallowed business interest expense from prior years (code 2) - Enter the prior year disallowed interest expense under prior section 163(j)(1)(A) for the last tax year beginning before 2018, to the extent the amounts otherwise qualify as business interest expense of the taxpayer.
    • Floor plan financing interest expense (code 3) - Enter the current year floor plan financing interest expense.  (This amount flows to Form 8990, line 4)
    • Taxable income before limitation on business interest expense* (code 4) - Enter taxable income computed as though all of the business interest expense is otherwise allowable business interest expense. In figuring taxable income, consider all other applicable limitations such as sections 163(f), 267, basis (sections 1366), at-risk (section 465), and excess business loss (section 461(I)) limitations prior to inputting the taxable income amount. The program does not automatically compute this amount.  (This amount flows to Form 8990, line 6)
    • Loss or deduction which is not properly allocable to a trade or business (code 5) - Enter any item of loss or deduction that is not properly allocable to a trade or business of the taxpayer, including the taxpayer’s loss or deduction from any excepted trades or businesses. The amount of the addition is limited to the amount the additional item affected taxable income.
      Do not include amounts from pass-through entities, which will be entered on another line.  (This amount flows to Form 8990, line 7)
    • Business interest expense not from a pass-through entity* (code 6) - Add to taxable income all business interest expense, to the extent included in taxable income, that is not from a pass-through entity. (This amount flows to Form 8990, line 8)
    • Net operating loss deduction under section 172 (code 7) - Enter amount of any net operating loss deduction carried forward or carried back to the current tax year under section 172.  (This amount flows to Form 8990, line 9)
    • Qualified business income deduction under Section 199A (code 8) - Enter amount of any qualified business income deduction allowed under section 199A. (This amount flows to Form 8990, line 10)
    • Depreciation, amortization, or depletion attributable to a trade or business* (code 9) - Enter amounts allowable for depreciation, amortization, or depletion attributable to a trade or business. Do not include amounts from pass-through entities, which will be entered on another line. For tax years beginning after 2021, do not add back the deductions for depreciation, amortization, or depletion attributable to a trade or business.  (This amount flows to Form 8990, line 11)
    • Loss or deduction from a pass-through entity* (code 10) - Enter any amount of loss or deduction items from pass-through entities (regardless of whether the entity is subject to the section 163(j) limitation).  (This amount flows to Form 8990, line 12)
    • Other additions (code 11) - A taxpayer subject to the section 163(j) limitation who has an interest in a pass-through entity not subject to the section 163(j) limitation should include their share of the entity’s adjusted taxable income in other additions.   (This amount flows to Form 8990, line 13)
    • Income or gain which is not properly allocated to a trade or business (code 12) - Enter any item of income or gain which is not properly allocable to a trade or business of the taxpayer, including the taxpayer’s income or gain from any excepted trade(s) or business(es). For example, a gain from the sale of a personal residence would be entered because it is not a gain allocable to a trade or business of the taxpayer.  Do not include amounts from pass-through entities, which will be entered on another line. (This amount will flow as a negative amount to Form 8990, line 17)
    • Business interest income not from a pass-through entity (code 13) - Enter all business interest income, to the extent included in taxable income, that is not from a pass-through entity (regardless of whether the entity is subject to the section 163(j) limitation). (This amount will flow as a negative amount to Form 8990, line 18)
    • Income or gain from a pass-through entity* (code 14) - Enter amount of any income or gain from pass-through entities. (This amount will flow as a negative amount to Form 8990, line 19)
    • Other reductions (code 15) - In other reductions, include floor plan financing expense. Also include any other reductions described in published guidance.  Enter the amount of income from a CFC as specified in proposed regulations. (This amount will flow as a negative amount to Form 8990, line 20)
    • Current year business interest income (code 16) - Enter the amount of business interest income directly paid to or accrued by the taxpayer, as well as business interest income allocated from a pass-through entity not subject to the section 163(j) limitation. (This amount will flow as a negative amount to Form 8990, line 23)
    • Itemized list of where the business interest expense is being deducted (Ctrl+E) (code 18)- If the business interest expense is limited and is reported on more than one location on the tax return, the Form 8990 instructions state that you must attach a schedule to Form 8990 which indicates the amount and line item on the tax return where the business interest expense is being deducted. Enter the required information here. (This amount flows to an Explanation page included with Form 8990)

Note: Amount(s) entered below print on Form 8990 only. They do not carry to any form or schedule on the tax return.

  1. Go to Screen 88, Limitation on Business Interest Expense.
  2. Check the box for Individual subject to section 163(j) limitation (code 17) to generate this form.
    • Check the box if the taxpayer is subject to the section 163(j) limitation on business interest expense, at the Corporation level.
      A taxpayer is not required to file Form 8990 if the taxpayer is a small business taxpayer and does not have excess business interest expense from a partnership. A small business taxpayer is defined as: a taxpayer that is not a tax shelter and has average annual gross receipts of $25 million or less for the 3 prior tax years under the gross receipts test of section 448(c). See Form 8990 instructions for more information.
  3. Complete all applicable fields;
    • Current year business interest expense, before the section 163(j) limitation (code 1) - Enter the business interest expense (no including floor plan financing interest expense or disallowed business interest expense carryforwards from prior years) that would have been deductible in the current year without the application of section 163(j).  Interest expense from an excepted trade or business should not be included. If a CFC group election has been made, enter the amount of the CFC’s allocable share of business interest expense. (This amount flows to Form 8990, Part I, Section I, line 1)
    • Disallowed business interest expense from prior years (code 2) - Enter the prior year disallowed interest expense under prior section 163(j)(1)(A) for the last tax year beginning before 2018, to the extent the amounts otherwise qualify as business interest expense of the taxpayer. (This amount flows to Form 8990, Part I, Section I, line 2)
    • Floor plan financing interest expense (code 3) - Enter the current year floor plan financing interest expense. (This amount flows to Form 8990, Part I, Section I, line 4)
    • Taxable income before limitation on business interest expense (code 4) - Enter taxable income computed as though all of the business interest expense is otherwise allowable business interest expense. In figuring taxable income, consider all other applicable limitations such as sections 163(f), 267, basis (sections 1366), at-risk (section 465), and excess business loss (section 461(I)) limitations prior to inputting the taxable income amount. The program does not automatically compute this amount. (This amount flows to Form 8990, Part I, Section II, line 6)
    • Loss or deduction which is not properly allocable to a trade or business (code 5) - Enter any item of loss or deduction that is not properly allocable to a trade or business of the taxpayer, including the taxpayer’s loss or deduction from any excepted trades or businesses. The amount of the addition is limited to the amount the additional item affected taxable income.  Do not include amounts from pass-through entities, which will be entered on another line. (This amount flows to Form 8990, Part I, Section II, line 7)
    • Business interest expense not from a pass-through entity (code 6) - Add to taxable income all business interest expense, to the extent included in taxable income, that is not from a pass-through entity. (This amount flows to Form 8990, Part I, Section II, line 8)
    • Net operating loss deduction under section 172 (code 7) - Enter amount of any net operating loss deduction carried forward or carried back to the current tax year under section 172. (This amount flows to Form 8990, Part I, Section II, line 9)
    • Qualified business income deduction under section 199A (code 8) - Enter amount of any qualified business income deduction allowed under section 199A. (This amount flows to Form 8990, Part I, Section II, line 10)
    • Depreciation, amortization, or depletion attributable to a trade or business (code 9) - Enter amounts allowable for depreciation, amortization, or depletion attributable to a trade or business. Do not include amounts from pass-through entities, which will be entered on another line. For tax years beginning after 2021, do not add back the deductions for depreciation, amortization, or depletion attributable to a trade or business. (This amount flows to Form 8990, Part I, Section II, line 11)
    • Loss or deduction from a pass-through entity (code 10) - Enter any amount of loss or deduction items from pass-through entities (regardless of whether the entity is subject to the section 163(j) limitation). (This amount flows to Form 8990, Part I, Section II, line 12)
    • Other additions (code 11) - A taxpayer subject to the section 163(j) limitation who has an interest in a pass-through entity not subject to the section 163(j) limitation should include their share of the entity’s adjusted taxable income in other additions. (This amount flows to Form 8990, Part I, Section II, line 13)
    • Income or gain which is not properly allocable to a trade or business (code 12) - Enter any item of income or gain which is not properly allocable to a trade or business of the taxpayer, including the taxpayer’s income or gain from any excepted trade(s) or business(es). For example; a gain from the sale of a personal residence would be entered because it is not a gain allocable to a trade or business of the taxpayer. Do not include amounts from pass-through entities, which will be entered on another line. (This amount flows to Form 8990, Part I, Section II, line 17 as a negative amount)
    • Business interest income not from a pass-through entity (code 13) - Enter all business interest income, to the extent included in taxable income, that is not from a pass-through entity (regardless of whether the entity is subject to the section 163(j) limitation). (This amount flows to Form 8990, Part I, Section II, line 18 as a negative amount)
    • Income or gain from a pass-through entity (code 14) - Enter the amount of any income or gain items from pass-through entities. (This amount flows to Form 8990, Part I, Section II, line 19 as a negative amount)
    • Other reductions (code 15) - In other reductions, include floor plan financing expense. Also, include any other reductions described in published guidance. Enter the amount of income from a CFC as specified in proposed regulations. (This amount flows to Form 8990, Part I, Section II, line 20 as a negative amount)
    • Current year business interest income (code 16) - Enter the amount of business interest income directly paid to or accrued by the taxpayer, as well as business interest income allocated from a pass-through entity not subject to the section 163(j) limitation. (This amount flows to Form 8990, Part I, Section III, line 23)
    • Itemized list of where the business interest expense is being deducted (Ctrl +E) (code 18) - If the business interest expense is limited and is reported on more than one location on the tax return, Form 8990 states that you must attach a schedule to Form 8990 which indicates the amount and line item on the tax return where the business interest expense is being deducted. (This information flows to an addtional page titled 'Explanation' listed below page 3)

Note: Amount(s) entered below print on Form 8990 only. If Form 8990 computes that some or all interest expense is disallowed, the allowed interest expense must be manually prorated and then entered as an interest in the affected areas of the return. Any computed excess taxable income or excess business interest income will automatically flow to Schedules K and K-1. If the S corporation is not subject to Section 163(j) limitations, but the shareholders are, Form 8990 will print as a worksheet and any business interest expense, adjusted taxable income, and business interest income will flow to Schedules K-1.

  1. Go to Screen 80, Limitation on Business Interest Expense.
  2. Check the box S Corporation is subject to the section 163(j) limitation (code 17) if applicable.
    • Check the box if the taxpayer is subject to the section 163(j) limitation on business interest expense, at the Corporation level.
      A taxpayer is not required to file Form 8990 if the taxpayer is a small business taxpayer and does not have excess business interest expense from a partnership. A small business taxpayer is defined as: a taxpayer that is not a tax shelter and has average annual gross receipts of $25 million or less for the 3 prior tax years under the gross receipts test of section 448(c). See Form 8990 instructions for more information.
  3. Check the boxes listed under S corporation is Not Subject to Section 163(j) Limitation subsection, if applicable.
    • Shareholders could be subject to section 163(j) limitation (code 20) - If the S corporation is not subject to section 163(j) limitations and may have shareholders that are subject to section 163(j) limitations, then select the box and make entries in this input screen. If an entry is made in this field, the program computes Form 8990, page 1 and prints the S corporation’s business interest expense, adjusted taxable income, and business interest income on Schedule K-1, Other Information.
      Note: If an entry is made in this field, Form 8990 will not print with the return. Instead, Form 8990, page 1 prints as a worksheet.
    • Carry amounts from the return to Form 8990 Worksheet (code 21) - Select the box to carry the amounts from the tax return to the Form 8990 Worksheet. This box should only be used when the “Not subject to section 163(j) limitations - Shareholders could be subject to section 163(j) limitation” box is checked. If there is an entry in this box, the program carries the following amounts to the Form 8990 Worksheet.
      • Current year business interest expense, before the section 163(j) limitation
      • Taxable income before limitation on business interest expense
      • Business interest expense not from a pass-through entity
      • Depreciation, amortization, or depletion attributable to a trade or business
      • Loss or deduction from a pass-through entity
      • Income or gain from a pass-through entity
Note: If this box is selected the input fields (in this screen) that represent the items listed above can be used as overrides. The input fields are denoted with an asterisk. Enter -1 in these fields, as necessary, to set the amounts to zero.
  1. Complete all applicable fields;
    • Current year business interest expense, before the section 163(j) limitation* (code 1) -  Enter the business interest expense (not including floor plan financing interest expense or disallowed business interest expense carryforwards from prior years) that would have been deductible in the current year (or, with regard to passive activities, the amount that would have been taken into account before application of the passive loss limitation rules) without the application of section 163(j).
      Interest expense from an excepted trade or business should not be included.
      If a CFC group election has been made, enter the amount of the CFC’s allocable share of business interest expense.
    • Disallowed business interest expense from prior years (code 2) - Enter the prior year disallowed interest expense under prior section 163(j)(1)(A) for the last tax year beginning before 2018, to the extent the amounts otherwise qualify as business interest expense of the taxpayer.
    • Floor plan financing interest expense (code 3) - Enter the current year floor plan financing interest expense.
    • Taxable income before limitation on business interest expense* (code 4) - Enter taxable income computed as though all of the business interest expense is otherwise allowable business interest expense. In figuring taxable income, consider all other applicable limitations such as sections 163(f), 267, basis (sections 1366), at-risk (section 465), and excess business loss (section 461(I)) limitations prior to inputting the taxable income amount. The program does not automatically compute this amount.
    • Loss or deduction which is not properly allocable to a trade or business (code 5) - Enter any item of loss or deduction that is not properly allocable to a trade or business of the taxpayer, including the taxpayer’s loss or deduction from any excepted trades or businesses. The amount of the addition is limited to the amount the additional item affected taxable income. Do not include amounts from pass-through entities, which will be entered on another line.
    • ​​​​Business interest expense not from a pass-through entity* (code 6) - Add to taxable income all business interest expense, to the extent included in taxable income, that is not from a pass-through entity.
    • Net operating loss deduction under section 172 (code 7) - Enter amount of any net operating loss deduction carried forward or carried back to the current tax year under section 172.
    • Qualified business income deduction under section 199A (code 8) - Enter amount of any qualified business income deduction allowed under section 199A.
    • Depreciation, amortization, or depletion attributable to a trade or business* (code 9) - Enter amounts allowable for depreciation, amortization, or depletion attributable to a trade or business. Do not include amounts from pass-through entities, which will be entered on another line. For tax years beginning after 2021, do not add back the deductions for depreciation, amortization, or depletion attributable to a trade or business.
    • Loss or deduction from a pass-through entity* (code 10) - Enter any amount of loss or deduction items from pass-through entities (regardless of whether the entity is subject to the section 163(j) limitation).
    • Other additions (code 11) - A taxpayer subject to the section 163(j) limitation who has an interest in a pass-through entity not subject to the section 163(j) limitation should include their share of the entity’s adjusted taxable income in other additions.
    • Income or gain which is not properly allocable to a trade or business (code 12) - Enter any item of income or gain which is not properly allocable to a trade or business of the taxpayer, including the taxpayer’s income or gain from any excepted trade(s) or business(es). For example, a gain from the sale of a personal residence would be entered because it is not a gain allocable to a trade or business of the taxpayer. Do not include amounts from pass-through entities, which will be entered on another line.
    • Business interest income not from a pass-through entity (code 13) - Enter all business interest income, to the extent included in taxable income, that is not from a pass-through entity (regardless of whether the entity is subject to the section 163(j) limitation).
    • Income or gain from a pass-through entity* (code 14) - Enter all business interest income, to the extent included in taxable income, that is not from a pass-through entity (regardless of whether the entity is subject to the section 163(j) limitation).
    • Other reductions (code 15) - In other reductions, include floor plan financing expense. Also, include any other reductions described in published guidance. Enter the amount of income from a CFC as specified in proposed regulations.
    • Current Year business interest income (code 16) - Enter the amount of business interest income directly paid to or accrued by the taxpayer, as well as business interest income allocated from a pass-through entity not subject to the section 163(j) limitation.
    • Itemized list of where the business interest expense is being deducted (Ctrl+E) (code 18) - If the business interest expense is limited and is reported on more than one location on the tax return, the Form 8990 instructions state that you must attach a schedule to Form 8990 which indicates the amount and line item on the tax return where the business interest expense is being deducted. Enter the required information here.

Form 8990 Sections:

Part I - Computation of Allowable Business Interest Expense

Part I is completed by all taxpayers subject to 163(j). Schedule A and Schedule B need to be completed before Part I when the taxpayer is a partner or shareholder of a pass-through entity subject to 163(j).
Complete Part I to determine your allowable business interest expense deduction.

  • If you are a taxpayer that owns an interest in a partnership subject to the section 163(j) limitation, see instructions to Schedule A before completing Part I.
  • If you are a taxpayer that is a shareholder in an S corporation or applicable CFC subject to the section 163(j) limitation, see instructions to Schedule B before completing Part I
  • Section I - Business Interest Expense (lines 1 - 5)
  • Section II - Adjusted Taxable Income (lines 6 - 22 Enter all numbers as positive amounts unless otherwise indicated)
  • Section III - Business Interest Income (lines 23 - 25)
  • Section IV - (lines 26 - 31)

Part II - Partnership Pass-Through Items

Part II is completed by a partnership that is subject to section 163(j) and is required to file Form 8990. The partnership items are allocated to the partners and are not carried forward by the partnership.

  • See the Instructions for Form 1065 for how the partnership reports the excess business interest expense, excess taxable income, and the excess business interest income to the partners.
  • See Ownership of pass-through entities not subject to the section 163(j) limitation, earlier.

Part III - S Corporation Pass-Through Items

Part III is completed by an S corporation that is subject to the section 163(j) limitation. The S corporation’s excess taxable income and excess business interest income are allocated to the shareholders pro rata after the S corporation’s section 163(j) limitation is determined and are not carried forward by the S corporation.

  • See the Instructions for Form 1120S for how to report the excess taxable income and the excess business interest income to the shareholders.

Schedule A—Summary of Partner’s Section 163(j) Excess Items

Any taxpayer that is required to complete Part I and is a partner in a partnership that is subject to the section 163(j) limitation must complete Schedule A before completing Part I. For foreign persons with an interest in a partnership engaged in a U.S. trade or business, the amount of excess items is limited by ECI. See Proposed Regulations section 1.163(j)-8(c) for additional information.

  • On line 43, enter the amount of current year excess business interest expense in column (c), current year excess taxable income in column (f), and the current year business interest income in column (g), reported to the partner on Schedule K-1 for each partnership.

Schedule B—Summary of S Corporation Shareholder’s Excess Taxable Income and Excess Business Interest Income

Any taxpayer that is required to complete Part I and is a shareholder in an S corporation that is subject to the section 163(j) limitation must complete Schedule B before completing Part I.

  • On line 45, enter the amount of current year excess taxable income in column (c) and current year excess business interest income in column (d), reported to the shareholder on Schedule K-1 for each S corporation.
  • If a CFC group election has been made, enter on line 45(c) the amount of excess taxable income of the CFC.

Worksheets A and B - Determination of Each Partner's Relevant Section 163(j) Items

The Proposed Regulations provide guidance regarding how a partnership subject to the section 163(j) limitation must allocate its deductible business interest expense and section 163(j) excess items, if any, among its partners. See Proposed Regulations section 1.163(j)-6(f). The partnership should use Worksheets A and B in these instructions and is responsible for keeping records that compute the allocation.

  • Lines 1 through 7 of Worksheet A are taken from the partnership’s Form 8990, which it must complete first. Lines 8 through 10 reflect the manner in which the partnership allocated its adjusted taxable income, business interest income, and business interest expense to its partners. Only items that were taken into account in lines 1 through 3 are taken into account in lines 8 through 10. As a result, section 743(b) adjustments, section 704(c) remedial allocations, allocations of investment income and expense, and amounts determined for the partner under Regulations section 1.882-5 are not taken into account in lines 8 through 10. See Proposed Regulations section 1.163(j)-6(f)(2)(ii) for the definitions of “allocable adjusted taxable income” (line 8), “allocable business interest income” (line 9), and “allocable business interest expense” (line 10). All of the information necessary to complete the rest of Worksheets A and B is contained in lines 1 through 10. See the Instructions for Form 1065 for how the partnership reports the excess business interest expense, excess taxable income, and the excess business interest income to the partners.
  • The calculation in Proposed Regulations section 1.163(j)-6(f)(2)(i) through (xi) are solely for the purpose of determining each partner’s allocable share of deductible business interest expense, excess business interest expense, excess taxable income, and excess business interest income. Accordingly, no rule set forth in Proposed Regulations section 1.163(j)-6(f)(2) prohibits a partnership from making an allocation to a partner that is otherwise permitted under section 704 and the regulations thereunder.

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