George operates a business thatin 2020 generated revenues of $50 million and allocable taxable income of $560,000. Included in the computation of allocable taxable income were $900,000 of business interest expense, $20,000 of business interest income, and $180,000 of depreciation. What is the maximum business interest deduction that George will be eligible to claim this year?

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The maximum business interest deduction is generally limited to the sum of the business interest income ($20,000) plus 30% of the adjusted taxable income. The adjusted taxable income is calculated by adding back to the taxable income ($560,000) the business interest expense ($900,000) and the depreciation ($180,000), which totals $1,640,000. Therefore, 30% of the adjusted taxable income is $492,000. Adding the business interest income of $20,000 to this amount gives a total of $512,000. However, the actual business interest expense was $900,000, which is less than the maximum allowable deduction calculated. Therefore, the maximum deduction George can claim is the actual interest expense of $900,000.

George Operates a Business Thatin 2020 Generated Revenues of $50