Financial Glossary
Form 8990 (Business Interest Expense Limitation)
Form 8990 is the IRS form used to calculate the limitation on the deduction for business interest expense under Internal Revenue Code Section 163(j). It determines how much interest a business may deduct in the current year, tracks any disallowed interest carried forward to future years, and applies to entities whose interest deductions are subject to the limit. Some small businesses meeting an IRS gross-receipts threshold are exempt from filing.
Problem & Application
Real estate investors and leveraged operators with significant loan interest can hit this limitation, which caps the deductible portion of business interest and pushes the excess into future years. Failing to track disallowed interest correctly means leaving deductions on the table or misstating taxable income. Because the rules and exemption thresholds are technical and change, leveraged owners should confirm applicability against current IRS guidance rather than assume all interest is deductible.
In Short
Form 8990 governs how much borrowing cost a business can actually deduct each year. For debt-heavy operators it can meaningfully change taxable income.