Learn about the changes and limitations of the provision to limit interest expense in the 税 Cut and Jobs Act of 2017.
Did you know that changes came into play for the interest expense limitation in 2022?
As you recall, the 税 Cut and Jobs Act of 2017 included a provision to limit interest expense. The limitation is calculated by multiplying a 税payer’s adjusted 税able income (“ATI”), 与EBITA相似，相差30%.
However, this limitation does not apply to floorplan interest. 如楼面利息支出确实超过30%, all of the floorplan interest is deductible; however, the dealer will not be eligible for bonus depreciation.
In 2022, depreciation and amortization are not eligible to be added back in the ATI calculation. 正如你所看到的，有几个移动的部分.
We have seen record profits and some pretty low-interest rates among the dealership groups in recent years. 因此, we haven’t seen much interest expense limited.
然而……
如果你把以上问题的答案考虑在内, 2023年你的利润可能会下降, 利率已经上升, 你的库存水平又回来了, you borrowed for the blue sky amount for a new dealership and you have leveraged your real estate potentially for an acquisition.
让我们想想这可能会做什么. The ATI calculation starts with 税able income, which if profits are down, so is ATI. Your interest rate is the highest in recent years, which means that interest expense is up. 你有车要卖, 这很好, but the inventory might not be moving as fast as before, 这意味着你需要支付更多的利息. The newer dealers you have might have working capital loans and your blue sky is probably financed, 这会引起更多的兴趣. Then your real estate entity will not be able to add back that depreciation for ATI which means a lower limitation. All of this is a perfect storm for limited interest expense.
A perfect storm can always be calmed by some planning. Let’s dive into these concepts sooner rather than later. 今年还剩五个月, we can plan now to help reduce the limitation on interest expense.
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The Schneider Downs 汽车 industry group serves dealers of all sizes, 从单一地点到大型经销商. Our members cross departments and meet regularly to ensure efficiencies in the services provided to our clients and discuss issues, regulations and trends affecting the automotive industry.
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