What limitations on business interest expenses are there for Form 8990 under the CARES Act?
Revenue Procedure 2020-22 provides, as part of the CARES Act, guidance for changes regarding Form 8990, Limitation on Business Interest Expense Under Section 163(j).
Taxpayers can now elect to calculate the Adjusted Taxable Income (ATI) limitation at a rate of 50% or continue to calculate the limitation at the 30% rate. There is no statement needed as long as the return is timely filed. If the return has already been filed and the taxpayer chooses to use the 50% rate, they will need to timely file an amended return with the new rate selected. In Drake19, a checkbox has been added to the 8990 screen to allow for the election of the new rate.
The 50% ATI limitation does not apply to partnerships for taxable years beginning in 2019. In the case of a partnership, the election must be made by the partnership only for taxable years beginning in 2020.