Instructions for Form 8990

Instructions for Form 8990

(Rev. December 2025)

Limitation on Business Interest Expense Under Section 163(j)

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 8990 and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form8990.

What’s New

Changes to adjusted taxable income (ATI) and business interest limitations. P.L. 119-21, commonly known

as the One Big Beautiful Bill Act, amended section 163(j)

to allow an add-back to taxable income for any deduction

allowable for depreciation, amortization, or depletion to

determine ATI for tax years beginning after 2024. Form

8990, line 11 has been revised to reinstate the deduction

allowable for depreciation, amortization, or depletion

attributable to a trade or business as an adjustment to

tentative taxable income for purposes of computing ATI.

See the instructions for Line 11, later.

For tax years beginning after 2025, limitations on

business interest will generally include capitalized interest

except for interest capitalized under sections 263(g) and

263A(f). Also, ATI will exclude U.S. shareholder inclusions

from controlled foreign corporations (CFCs).

Floor plan financing interest expense. For tax years

beginning after 2024, P.L. 119-21 also expanded the

definition of floor plan financing interest expense to

include any trailer or camper, which is designed to provide

temporary living quarters for recreational, camping, or

seasonal use, and is designed to be towed by or affixed to

a motor vehicle.

General Instructions

Purpose of Form

Use Form 8990 to figure the amount of business interest

expense you can deduct and the amount to carry forward

to the next year. For more information, see Regulations

sections 1.163(j)-1 through 1.163(j)-11.

Computation of section 163(j) limitation. If section

163(j) applies to you, the business interest expense

deduction allowed for the tax year is limited to the sum of:

1. Business interest income,

2. Applicable percentage of the adjusted taxable

income (ATI), and

3. Floor plan financing interest expense.

Carryforward of disallowed business interest. The

amount of any business interest expense that is not

allowed as a deduction under section 163(j) for the tax

Jan 21, 2026

year is carried forward to the following year as a

disallowed business interest expense carryforward.

However, see Special Rules for partnership treatment of

disallowed business interest expense, later.

Who Must File

A taxpayer (including, for example, an individual,

corporation, partnership, S corporation) with business

interest expense; a disallowed business interest expense

carryforward; or current year or prior year excess business

interest expense must generally file Form 8990, unless an

exclusion from filing applies.

A pass-through entity allocating excess taxable income

or excess business interest income to its owners must file

Form 8990, regardless of whether it has any interest

expense.

A regulated investment company that pays section

163(j) interest dividends (see Regulations sections

1.163(j)-1(b)(22)(iii)(F) and 1.163(j)-1(b)(35)) must file

Form 8990.

A taxpayer that is a U.S. shareholder of an applicable

controlled foreign corporation (CFC) that has business

interest expense, disallowed business interest expense

carryforward, or is part of a CFC group, must generally

apply section 163(j) to the applicable CFC and attach a

Form 8990 with each Form 5471. See Regulations section

1.163(j)-7(b).

For a CFC group, an additional Form 8990 must be filed

for the CFC group to report the combined limitations

attributable to a trade or business of all CFC group

members. See Specified Group Parent, later.

If a safe-harbor election is made for a CFC group, Form

8990 does not need to be filed for each CFC group

member, but Form 8990 must be filed for the CFC group.

Exclusions from filing. 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 taxpayer is also not required to file Form

8990 if it only has interest expense from one or more of

these excepted trades or businesses:

• The trade or business of providing services as an

employee,

• An electing real property trade or business,

• An electing farming business, or

• Certain regulated utility businesses.

If a pass-through entity is not required to file Form 8990

because it is a small business taxpayer, but a partner or

shareholder is required to file Form 8990, the

pass-through entity is required, upon request by the

partner or shareholder, to provide certain information so

that the partner or shareholder can complete their return.

See Ownership of pass-through entities not subject to the

section 163(j) limitation, later.

Instructions for Form 8990 (Rev. 12-2025) Catalog Number 71420E

Department of the Treasury Internal Revenue Service www.irs.gov

Coordination With Other Limitations

Categorization and allocation of interest expense.

Current year interest expense must be categorized under

Temporary Regulations section 1.163-8T (for example, as

investment interest, personal interest, or business

interest) before computing the section 163(j) limitation on

the deduction for business interest expense. Also, see

Proposed Regulations section 1.163-14 ((85 FR 56846)

(2020 Proposed Regulations)) for rules on allocating

interest expense associated with debt proceeds for

pass-through entities. Only business interest expense is

subject to the section 163(j) limitation.

For purposes of the section 163(j) limitation only,

business interest expense refers to interest expense

properly allocable to trades or businesses that are not

excepted trades or businesses. See Taxpayers with both

excepted and non-excepted trades or businesses, later,

for allocating interest expense between excepted and

non-excepted trades or businesses before computing the

section 163(j) limitation.

Interest expense limitations. An expense that has been

disallowed, deferred, or capitalized in the current tax year,

or which has not yet been accrued, is not taken into

account for section 163(j) purposes. Section 163(j)

applies after any basis limitation and before the operation

of the at-risk, passive activity loss, or excess business

loss limitations. See Regulations section 1.163(j)-3 for

additional information on interactions of section 163(j) with

other code provisions relating to interest expense.

If a taxpayer’s deduction for business interest expense

is limited under section 163(j) and such taxpayer has

more than one business activity for purposes of either the

at-risk (section 465) or passive activity loss (section 469)

limitation provisions, then the section 163(j) limitation will

apply to the overall business interest expense from all the

business activities of the taxpayer. The proportion of each

activity’s business interest expense that is disallowed is

the same proportion as the disallowed business interest

expense over the total business interest expense. See

Regulations section 1.163(j)-3(c), example 4, and

Temporary Regulations section 1.163-8T.

Partner basis limitations. Deductible business interest

expense and excess business interest expense are

subject to section 704(d) loss limitation rules. See

Regulations section 1.163(j)-6(h)(1) and (2).

Definitions

The definitions below are only for the purposes of applying

section 163(j).

Small business taxpayer. A small business taxpayer is

not subject to the section 163(j) limitation and is generally

not required to file Form 8990.

A small business taxpayer is a taxpayer that is not a tax

shelter (as defined in section 448(d)(3)) and meets the

gross receipts test, described below. A tax shelter is

defined as:

• Any enterprise other than a C corporation offering

ownership via registered securities,

• Any syndicate within the meaning of section 1256(e)(3)

(B) (see Regulations section 1.163(j)-2(d)(3)), or

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• Any entity described in section 6662(d)(2)(C)(ii).

A pass-through entity that is a small business taxpayer

does not allocate excess taxable income, excess business

interest income, or excess business interest to its owners.

Gross receipts test. For tax years beginning in 2025, a

taxpayer meets the gross receipts test if the taxpayer has

average annual gross receipts of $31 million or less for the

3 prior tax years.

A taxpayer’s average annual gross receipts for the 3

prior tax years is determined by:

1. Adding the gross receipts for the 3 prior tax years,

and

2. Dividing the total by 3.

Caution: The average annual gross receipts test

threshold amount may be adjusted for inflation. The

Instructions for Form 8990 may not be revised to reflect

this amount. For tax years beginning after 2025, see the

instructions for your applicable income tax return for the

average annual gross receipts test threshold amount for

the current tax year. The average annual gross receipts

test threshold amount is also available at IRS.gov/

InflationAdjustment. Select the applicable tax year news

release, then click the Revenue Procedure link to see the

threshold amount under Limitation on Use of Cash

Method of Accounting.

In the case of any taxpayer, which is not a corporation

or a partnership, and except as provided below, the gross

receipts test is applied in the same manner as if such

taxpayer were a corporation or a partnership.

Gross receipts for any tax year must be reduced by

returns and allowances made during the year. For

individuals and for section 163(j) only, gross receipts do

not include inherently personal amounts such as disability

benefits, social security benefits, and wages received as

an employee and reported on Form W-2.

For section 163(j), a taxpayer with an ownership

interest in a partnership or S corporation must include a

share of the partnership’s or S corporation’s gross

receipts, in proportion to the partner’s distributive share of

items of gross income or S corporation’s shareholder’s pro

rata share of gross receipts, unless the partner and

partnership, or S corporation shareholder and S

corporation, are treated as a single person. In that case,

see Gross receipts aggregation for members of a

controlled group, businesses under common control, or

members of an affiliated group, later.

The gross receipts of an organization subject to tax

under section 511 only include gross receipts taken into

account in determining its unrelated business taxable

income.

Note: Gross receipts must meet the definition under

section 448(c) and Temporary Regulations section

1.448-1T(f)(2)(iv).

Any reference to your business gross receipts also

includes a reference to the gross receipts of any

predecessor of your business. If your business was not in

existence for the entire 3-year period, base your average

annual gross receipts on the period your business existed.

Also, if your business had a tax year of less than 12

Instructions for Form 8990 (Rev. 12-2025)

months, your gross receipts must be annualized by

multiplying the gross receipts for the short period by 12

and dividing the result by the number of months in the

short period.

The prior period gross receipts must be annualized for

any short period before dividing by 3.

For assistance in preparing the average annual gross

receipts, see the Average Annual Gross Receipts

Worksheet Per Section 448(c), later.

Gross receipts aggregation for members of a

controlled group, businesses under common control,

or members of an affiliated group. For section 163(j),

gross receipts may include the receipts of more than one

taxpayer. For this purpose, all members of a controlled

group of corporations (as defined in section 52(a)), and all

members of a group of businesses under common control

(as defined in section 52(b)), are treated as a single

person; and all members of an affiliated service group (as

defined in sections 414(m) and (o)) shall be treated as a

single person. If you and a partnership or S corporation in

which you hold an interest are treated as a single person

for purposes of the gross receipts test, aggregate the

partnership’s or S corporation’s gross receipts with your

gross receipts. Do not duplicate amounts by also including

a share of partnership or S corporation gross receipts as

your own gross receipts.

For more information, see Average Annual Gross

Receipts Worksheet Per Section 448(c), later.

Also see FAQs Regarding the Aggregation Rules at

IRS.gov.

Tax shelter election. A taxpayer that is a tax shelter as

defined in section 448(d)(3) is not permitted to use the

small business exemptions contained in section 163(j)(3).

Under section 448(d)(3), a taxpayer that is a “syndicate” is

considered to be a tax shelter. To determine whether a

taxpayer is a syndicate, the section 448 regulations permit

a taxpayer to make an annual election to use its

allocations of income, gain, loss, or deduction made in the

immediately preceding tax year, instead of using its

current year allocations. The election is made on a timely

filed original return (including extensions) for the tax year

for which it is made. It is only valid for that tax year and

once made cannot be revoked. See Regulations section

1.448-2(b)(2)(iii)(B)(2) for guidance on the time and

manner of making the annual election.

Excepted trade or business. A trade or business does

not include:

• Performing services as an employee,

• An electing real property trade or business,

• An electing farming business, or

• Certain regulated utility businesses.

How to make an election and the effect of being an

excepted trade or business are discussed under Special

Rules, later.

Electing real property trade or business. A real

property trade or business engaged in activities described

in section 469(c)(7) may elect to not be subject to the

section 163(j) limitation. See Elections under Special

Rules, later, for the effect of making an election. Real

property trade or business means any real property

development, redevelopment, construction,

Instructions for Form 8990 (Rev. 12-2025)

reconstruction, acquisition, conversion, rental, operation,

management, leasing, or brokerage trade or business.

Electing farming business. Farming businesses (as

defined in section 263A(e)(4)) and specified agricultural

and horticultural cooperatives (as defined in section

199A(g)(4)) may elect to not be subject to the section

163(j) limitation. See Elections under Special Rules, later,

for the effect of making an election. A farming business

includes livestock, dairy, poultry, fish, fruit, nut, and truck

farms. It also includes plantations, ranches, ranges, and

orchards. A fish farm is an area where fish and other

marine animals are grown or raised and artificially fed,

protected, etc., but it does not include an area where they

are merely caught or harvested. A plant nursery is a farm

for purposes of deducting soil and water conservation

expenses.

A specified agricultural or horticultural cooperative is a

cooperative to which Part I of subchapter T of the Internal

Revenue Code applies that manufactures, produces,

grows, or extracts any agricultural or horticultural product,

or has marketed agricultural or horticultural products.

Certain regulated utility businesses. Certain regulated

utility trades or businesses are not subject to the section

163(j) limitation. No election is required for certain

regulated utility businesses, meaning these trades or

businesses are automatically excepted from the limitation.

Automatically excepted regulated utilities are trades or

businesses that furnish or sell:

• Electrical energy, water, or sewage disposal services;

• Gas or steam through a local distribution system; or

• Transportation of gas or steam by pipeline.

To be an automatically excepted regulated utility trade

or business, the rates for furnishing or sale of the above

listed items must be established or approved by a state or

political subdivision thereof, by any agency or

instrumentality of the United States, by a public service or

public utility commission or other similar body of any state

or political subdivision thereof, on a rate of return and cost

of service basis, or by the governing or rate-making body

of an electric cooperative.

If the trade or business does not qualify as an

automatically excepted regulated utility trade or business

because its rates are not established or approved on a

cost of service and rate of return basis, the taxpayer may

be able to elect that the trade or business be an excepted

trade or business. See Regulations section 1.163(j)-1(b)

(15)(iii)(A) regarding electing utility trades or businesses.

Also, see Elections under Special Rules, later, for the

effect of making an election.

Interest. In general, interest is any amount that is paid,

received, or accrued as compensation for the use or

forbearance of money or that is treated as interest under

the Internal Revenue Code or the regulations thereunder.

Regulations section 1.163(j)-1(b)(22) provides

additional guidance on what constitutes interest for

purposes of section 163(j), including anti-avoidance rules

and a list of other amounts treated as interest, such as

certain amounts of bond premium, factoring income, and

section 163(j) interest dividends from regulated

investment companies.

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Business interest income. Business interest income

means the amount of interest income includible in the

taxpayer’s gross income for the tax year, which is properly

allocable to a trade or business. Business interest income

does not include investment income.

See C corporation business interest expense and

income, later.

Interest income that is allocable to an excepted trade or

business is not treated as business interest income.

Business interest expense. Business interest expense

means any interest paid or accrued that is properly

allocable to a trade or business. Business interest

expense includes elective capitalized interest but,

generally, does not include investment interest or other

personal interest. See Temporary Regulations section

1.163-9T for a definition of personal interest. However,

see C corporation business interest expense and income,

later.

Interest expense that is allocable to an excepted trade

or business is not treated as business interest expense.

Excess business interest expense. If a partnership has

a limitation on business interest expense, the disallowed

business interest expense is not carried over by the

partnership, but is allocated to the partners. This interest

is referred to as excess business interest expense.

Tentative taxable income. Tentative taxable income is

generally the same as taxable income under section 63.

However, tentative taxable income is computed as if the

section 163(j) limitation does not exist; therefore, do not

include disallowed business interest expense

carryforwards from a prior year or excess business

interest expense from a prior year.

See Regulations section 1.163(j)-1(b)(43) for more

information.

Adjusted taxable income (ATI). ATI means tentative

taxable income of the taxpayer computed without regard

to:

• Any item of income, gain, deduction, or loss, which is

not properly allocable to a trade or business (within the

meaning of section 162);

• Any business interest income or business interest

expense;

• The amount of any net operating loss deduction under

section 172;

• The amount of any qualified business income allowed

under section 199A (for purposes of determining ATI the

section 199A deduction is determined without regard to

section 163(j). See Regulations section 1.163(j)-1(b)(43));

• For tax years beginning before 2022, and after 2024,

any deduction for depreciation, amortization, or depletion

attributable to a trade or business; and

• Adjustments described in published guidance.

To determine ATI, tentative taxable income is computed

after applying other sections limiting the deductibility of

interest, such as sections 263A and 267, as well as basis,

at-risk and passive activity loss limitations.

Caution: Any additions or subtractions from taxable

income in arriving at ATI are limited to the amount by

which the item affects taxable income.

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Applicable percentage. The applicable percentage is

the percentage applied to ATI for purposes of computing

the business interest expense limitation calculation. The

applicable percentage is 30% (30% ATI limitation).

Floor plan financing interest expense. Floor plan

financing interest expense is not subject to the section

163(j) limitation. Floor plan financing interest expense is

interest on debt used to finance the acquisition of motor

vehicles and any trailer or camper which is designed to

provide temporary living quarters for recreational,

camping, or seasonal use and is designed to be towed by,

or affixed to, a motor vehicle that is held for sale or lease

where the debt is secured by the acquired inventory.

Excess taxable income. In general, excess taxable

income is the amount of a partnership’s or S corporation’s

ATI that is in excess of the amount of ATI required to

support the partnership’s or S corporation’s business

interest expense deduction. This amount is computed by

a partnership or an S corporation and is allocated to the

partner or shareholder. This amount is used by the partner

or shareholder in determining their current year ATI.

Excess business interest income. Excess business

interest income is the amount by which current year

business interest income exceeds current year business

interest expense (excluding floor plan financing). This

amount is computed by a partnership or an S corporation

and is allocated to the partner or shareholder. This

amount is used by the partner or shareholder in

determining their current year business interest income.

Special Rules

Elections. A taxpayer engaged in a real property trade or

business, a farming business, or a non-automatically

excepted regulated utility trade or business may elect not

to limit business interest expense under section 163(j) for

such trade or business. This is an irrevocable election.

If the real property trade or business or farming

business election is in effect, you are required to use the

alternative depreciation system (ADS) for certain property.

See Pub. 946, How To Depreciate Property. Also, you are

not entitled to the special depreciation allowance for that

property. For a taxpayer with more than one qualifying

business, the election is made with respect to each trade

or business.

Electing real property trade or business. An electing

real property trade or business must use the ADS for any

nonresidential real property, residential rental property,

and qualified improvement property used in its trade or

business.

Revenue Procedure 2021-9. Revenue Procedure

2021-9 provides a safe harbor that allows a taxpayer

engaged in a trade or business that manages or operates

a residential living facility that provides certain

supplemental assistive, nursing, and other routine medical

services to treat such trade or business as a real property

trade or business. See Revenue Procedure 2021-9 for

additional information and requirements to qualify for the

safe harbor.

Instructions for Form 8990 (Rev. 12-2025)

Electing farming business. An electing farming

business must use the ADS for any farming property the

taxpayer owns with a recovery period of 10 years or more.

Regulated utility trade or business. Automatically

excepted utility trades or businesses and electing utility

trades or businesses cannot claim the additional first-year

depreciation deduction under section 168(k) for any

property that is primarily used in the excepted regulated

utility trade or business.

Safe harbor for real estate investment trusts (REITs).

Under certain circumstances, a REIT (and a partnership

controlled by one or more REITs) is eligible to make an

election to be a real property trade or business. See

Regulations section 1.163(j)-9(h).

How to make the election. To make an election for a

real property, farming, or non-automatically excepted

regulated utility trade or business, attach an election

statement to a timely filed original tax return (including

extensions). Once the election is made, it is irrevocable.

The statement must be titled “Section 1.163(j)-9

Election” (for real property or farming businesses) or

“Section 1.163(j)-1(b)(15)(iii) Election” (for an electing

utility trade or business), and must contain the following

information for each electing trade or business:

• The taxpayer’s name;

• The taxpayer’s address;

• The taxpayer’s social security number (SSN) or

employer identification number (EIN);

• A description of the taxpayer’s electing trade or

business, sufficient to demonstrate qualification for an

election, including the principal business activity code;

and

• A statement that the taxpayer is making an election

pursuant to section 163(j)(7)(B) (as an electing real

property trade or business) or (C) (as an electing farming

business), or Regulations section 1.163(j)-1(b)(15)(iii) (as

an electing utility trade or business), as applicable.

Consolidated group’s trade or business. Only the

name and taxpayer identification number (TIN) of the

agent for the group, as defined in Regulations section

1.1502-77, must be provided on the election statement.

Partnership’s trade or business. An election for a

partnership must be made on the partnership’s return with

respect to any trade or business that the partnership

conducts. An election by a partnership does not apply to a

trade or business conducted by a partner outside the

partnership.

Taxpayers with both excepted and non-excepted

trades or businesses. Taxpayers must allocate and

apportion their interest expense, interest income, and

other tax items between excepted and non-excepted

trades or businesses, applying the rules under

Regulations section 1.163(j)-10. An asset basis approach

is generally used to allocate interest expense and interest

income. Regulations section 1.163(j)-10(c) requires a

taxpayer to attach a statement to its timely filed tax return,

providing information related to the asset basis and

allocation determination, as provided, in Regulations

section 1.163(j)-10(c)(6)(iii).

Instructions for Form 8990 (Rev. 12-2025)

Partnerships. If a partnership is subject to the section

163(j) limitation, the section 163(j) limitation is applied at

the partnership level. If a partnership has deductible

business interest expense, such deductible business

interest expense is not subject to any further limitation

under section 163(j) at the partner level. For all other

purposes of the Code, however, deductible business

interest expense retains its character as business interest

expense at the partner level.

If the partnership has a limitation on business interest

expense, the disallowed business interest expense

(excess business interest expense) is not carried over by

the partnership, but is allocated to the partners.

After completing Form 8990, the partnership must

determine how the deductible business interest expense,

excess business interest expense, excess taxable income,

and excess business interest income are allocated among

the partners. Worksheet A—Determination of Each

Partner’s Deductible Business Interest Expense and

Section 163(j) Excess Items and Worksheet

B—Determination of Each Partner’s Relevant Section

163(j) Items are to be used to determine the amount of

each item allocable to each partner. See Regulations

section 1.163(j)-6(f)(2) for additional information on the

allocation.

Self-charged interest. See Regulations section

1.163(j)-6(n) for the treatment of business interest income

and business interest expense with respect to lending

transactions between a partnership and a partner.

Partner. A partner’s excess business interest expense is

treated as paid or accrued by the partner in subsequent

years to the extent the partner is allocated current year

excess taxable income or excess business interest

income from the same partnership.

If a partner not subject to the section 163(j) limitation

has excess business interest expense from a prior year

and is allocated excess taxable income or excess

business interest income in the current year, the partner

would file Form 8990 and the amount of excess business

interest expense treated as paid or accrued in the current

year would not be subject to further limitation under

section 163(j). See Schedule A, Summary of Partner’s

Section 163(j) Excess Items, later.

A partner subject to the section 163(j) limitation will

include the amount of excess business interest expense

treated as paid or accrued in figuring its current year

business interest expense limitation.

If both a partnership and a partner are subject to the

section 163(j) limitation, the partner’s current year

business interest expense limitation computation will

include the following amounts from each of its

partnerships:

• Current year excess taxable income,

• Excess business interest expense treated as paid or

accrued, and

• Current year excess business interest income.

These amounts will not include items from an excepted

trade or business.

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If a partner is subject to the section 163(j) limitation and

the partnership is not, see Ownership of pass-through

entities not subject to the section 163(j) limitation, later.

In the event a partner sells a partnership interest and

the partnership in which the interest is being sold owns

only non-excepted trade or business assets, the gain or

loss on the sale of the partnership interest is included in

the partner’s ATI. If the partnership interest consists of

both excepted and non-excepted assets, the partner may

use the method set forth in Regulations section

1.163(j)-10(c) to determine the amount properly allocable

to a non-excepted trade or business and, therefore,

properly includible in the partner’s ATI.

Excess business interest expense from a prior tax

year that was suspended under section 704(d) (“negative section 163(j) expense”). See Regulations

section 1.163(j)-6(h) for basis adjustment calculations and

ordering rules for losses under section 704(d).

Excess business interest expense in tiered partnerships. See 2020 Proposed Regulations section

1.163(j)-6(j) for treatment of excess business interest

expense in tiered partnerships.

S corporation. The section 163(j) limitation is applied at

the S corporation level. Disallowed business interest

expense is carried over by the S corporation and is treated

as business interest expense paid or accrued in the

following year.

For a shareholder subject to the section 163(j)

limitation, the shareholder’s current year section 163(j)

limitation computation will include the following amounts

from each of its S corporations:

• Current year excess taxable income, and

• Current year excess business interest income.

These amounts will not include items from an excepted

trade or business.

Ownership of pass-through entities not subject to

the section 163(j) limitation. If you are subject to the

section 163(j) limitation and are an owner of a

pass-through entity that is not subject to the section 163(j)

limitation, your share of the pass-through business

interest expense is not subject to the section 163(j)

limitation, and your share of non-excepted trade or

business items of income, gain, loss, and deduction

(including business interest expense and business

interest income) of such pass-through entity, if net

positive, is included on line 13. You must request the

pass-through entity to separately state, in sufficient detail,

the items necessary to include on line 13.

In the event a partnership allocates excess business

interest expense to one or more of its partners, and in a

later tax year the partnership is an exempt entity, the

excess business interest expense from the prior year is

treated as business interest expense paid or accrued by

the partner in the later year. See Regulations section

1.163(j)-6(m)(3).

C corporation business interest expense and income. Solely for section 163(j), all interest paid or

accrued (or treated as paid or accrued) by a C corporation

is business interest expense, and all interest includible in

gross income by a C corporation is business interest

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income, except to the extent such interest expense or

interest income is allocable to an excepted trade or

business.

Any investment interest expense, investment interest

income, or investment expenses that a partnership pays,

receives, or accrues and allocates to a C corporation

partner as a separately stated item is treated by the C

corporation as properly allocable to a trade or business of

that partner. Similarly, for purposes of section 163(j), any

other tax items of a partnership that are neither properly

allocable to a trade or business of the partnership nor

described in section 163(d) and that are allocated to a C

corporation partner as separately stated items, are treated

as properly allocable to a trade or business of that partner.

See Regulations section 1.163(j)-4(b)(3)(i).

Current year business interest expense is deducted

before disallowed business interest expense

carryforwards, which are then deducted in the order of the

year in which they were incurred, starting with the earliest

year, subject to certain limitations.

Consolidated group. A consolidated group has a single

section 163(j) limitation. A consolidated group files one

Form 8990. For members entering or leaving the group,

see Regulations section 1.163(j)-5 for applicable

limitations.

Intercompany obligations. All intercompany

obligations, as defined in Regulations section

1.1502-13(g)(2)(ii), are disregarded for purposes of

determining a member’s business interest expense and

business interest income and in figuring the consolidated

group’s ATI.

Tax-exempt corporations with unrelated business income (UBI). The rule for C corporation interest expense

and income applies to a corporation that is subject to the

unrelated business income tax under section 511 only

with respect to that corporation’s items of income, gain,

deduction, or loss that are taken into account in computing

the corporation’s unrelated business taxable income, as

defined in section 512.

Regulated investment companies (RICs) and real estate investment trusts (REITs). For special rules for

determining ATI for RICs and REITs, see Regulations

section 1.163(j)-4(b)(4). For a safe harbor for REITs (and

partnerships controlled by one or more REITs) making an

election to be an electing real property trade or business,

see Regulations section 1.163(j)-9(h).

Trading partnerships. A trading partnership is a

partnership engaged in a trade or business activity of

trading personal property (including marketable securities)

for the account of owners of interests in the activity, as

described in Temporary Regulations section 1.469-1T(e)

(6). A trading partnership is required to bifurcate its

interest expense from a trading activity between partners

that materially participate in the trading activity and

partners that do not materially participate. Only the portion

of the interest expense that is allocable to the materially

participating partners is subject to limitation under section

163(j) at the partnership level. In addition, the trading

partnership is required to bifurcate all of its other items of

income, gain, loss, and deduction from its trading activity

allocable to the partners that do not materially participate.

Instructions for Form 8990 (Rev. 12-2025)

Such items are not taken into account at the partnership

level as items from a trade or business for section 163(j),

but instead are treated as items from an investment

activity of the partnership.

Foreign persons with effectively connected income

(ECI). A nonresident alien individual or foreign

corporation that is not a relevant foreign corporation and

that has ECI is also subject to the section 163(j) limitation.

As foreign persons are only taxed on their ECI, ATI,

business interest expense, business interest income, and

floor plan financing interest expense are modified to limit

such amounts to income, which is ECI and expenses

properly allocable to ECI. A relevant foreign corporation

means any foreign corporation whose classification is

relevant under Regulations section 301.7701-3(d)(1) for a

tax year, other than solely pursuant to sections 881 or

882.

Before applying section 163(j), a foreign corporation

that has ECI must first determine its business interest

expense allocable to ECI under Regulations section

1.882-5. Business interest expense allocable to ECI is

reported on Schedule I (Form 1120-F). Disallowed

business interest expense carryforward, as determined

under section 163(j), that was allocable to ECI in a prior

year but deductible in the current tax year and any current

year ECI business interest expense that becomes

disallowed business interest expense carryforward, after

applying section 163(j), are also included on Schedule I

(Form 1120-F).

Relevant foreign corporations. Section 163(j) generally

applies to determine the deductibility of a relevant foreign

corporation’s business interest expense for purposes of

computing its taxable income (determined under

Regulations section 1.952-2 or the rules of section 882) in

the same manner as it applies to determine the

deductibility of a domestic C corporation’s business

interest expense for purposes of computing its taxable

income. An applicable CFC means a foreign corporation

described in section 957, but only if the foreign

corporation has at least one U.S. shareholder that owns

(within the meaning of section 958(a)) stock of the foreign

corporation.

CFC group election. In order to make a CFC group

election under Regulations section 1.163(j)-7(e), each

designated U.S. person (as defined in Regulations section

1.163(j)-7(k)(12)) must attach the election statement

described in Regulations section 1.163(j)-7(e)(5)(iv) to the

CFC group’s Form 8990 in the year the CFC group

election is made. The statement must include the name

and taxpayer identification number of all designated U.S.

persons, a statement that the CFC group election is being

made, the specified period (as defined in Regulations

section 1.163(j)-7(k)(29)) for which the CFC group

election is being made, the name of each CFC group

member, and its specified tax year with respect to the

specified period. If a CFC group election was previously

revoked, the statement must include a certification that the

specified period for which the election is made did not

begin before 60 months following the last day of the

specified period for which the election was revoked. See

Regulations section 1.163(j)-7(e)(5)(ii).

Instructions for Form 8990 (Rev. 12-2025)

If a CFC group election is in effect, a single section

163(j) limitation is computed for a specified period of a

CFC group. A CFC group sums each of its CFC group

member’s separate-company applicable amounts for a

specified period. Items of a CFC group member are

translated into a single currency (which may be the U.S.

dollar or the functional currency of a plurality of the CFC

group members) for the CFC group and back to the

functional currency of the CFC group member using the

average exchange rate for the CFC group member’s

specified tax year (as defined in Regulations section

1.163(j)-7(k)(30)), using any reasonable method,

consistently applied. Only non-ECI amounts are included

in the CFC group calculation. A separate section 163(j)

calculation and Form 8990 must be filed for the ECI of a

CFC group member, if any. The CFC group member’s ECI

attributes are treated, for this purpose, as attributes of a

separate applicable CFC.

Form 8990 for each CFC group member. When a CFC

group election is in effect, the U.S. shareholders of each

CFC group member must file Form 8990 with Form 5471

for each CFC group member on a separate entity basis

(unless a safe-harbor election is in effect for the CFC

group). On each CFC group member’s Form 8990, report

the individual CFC group member’s amounts on line 1

through line 25. Do not complete line 26 through line 29

and report the CFC group member’s current year business

interest expense deduction and disallowed business

interest expense (as determined under Regulations

section 1.163(j)-7(c)(3)) on lines 30 and 31.

Additional Form 8990 for CFC group. In addition to the

Form 8990 that is filed for each CFC group member, a

separate Form 8990 must be filed for the CFC group in

order to report the combined limitation of the CFC group.

The CFC group’s Form 8990 must be filed by the specified

group parent, if the specified group parent is a qualified

U.S. person. If the specified group parent is a CFC, the

U.S. shareholders that file Form 5471 for the specified

group parent must file the CFC group’s Form 8990 with

Form 5471 of the specified group parent. In addition, if a

U.S. shareholder that files Form 5471 for a CFC group

member is not the specified group parent and does not file

Form 5471 for the specified group parent, the CFC group’s

Form 8990 should be attached to such U.S. shareholder’s

tax return.

On the CFC group’s Form 8990, line 1 through line 25

should be completed by adding together the individual

amounts reported by each CFC group member on a

separate entity basis. However, for purposes of

determining ATI of a CFC group, the limitation that ATI

cannot be less than zero applies with respect to the ATI of

the CFC group but not the ATI of any CFC group member.

Line 26 through line 31 of Form 8990 should be

completed by reference to the total amounts reported on

line 1 through line 25. Each designated U.S. person

should attach a statement identifying the specified group

parent, the specified period, and the name and specified

tax year of each CFC group member.

On the CFC group’s Form 8990, enter “Specified Group

Parent” as the name of the foreign entity on line A. Enter

zeros for the foreign entity’s EIN number. Do not complete

Schedule A or Schedule B of the CFC group’s Form 8990.

7

Compliance with these instructions satisfies the

statement requirement under Regulations section

1.163(j)-7(e)(5)(iv) and the annual information reporting

requirement under Regulations section 1.163(j)-7(e)(6).

Revocation of CFC group election. In order to revoke a

CFC group election, each designated U.S. person must

attach the statement described in Regulations section

1.163(j)-7(e)(5)(iv) to the Form 8990 that is filed by or on

behalf of the specified group parent. The statement must

include the name and taxpayer identification number of all

designated U.S. persons, a statement that the CFC group

election is being revoked, the name of the specified group

parent, the specified period for which the election is

revoked, and the name and specified tax year of each

specified group member. The statement must also include

a certification that the specified period for which the

election is revoked did not begin before 60 months

following the last day of the specified period for which the

election was made. See Regulations section 1.163(j)-7(e)

(5)(ii).

Specified group parent. A specified group parent

means a qualified U.S. person or an applicable CFC. A

qualified U.S. person means a United States person

described in section 7701(a)(30)(A) or (C). Members of a

consolidated group that file (or that are required to file) a

consolidated U.S. federal income tax return are treated as

a single qualified U.S. person, and individuals described

in section 7701(a)(30)(A) whose filing status is married

filing jointly are treated as a single qualified U.S. person.

Designated U.S. person. With respect to a specified

group, a designated U.S. person means either the

specified group parent (if the specified group parent is a

qualified U.S. person) or each controlling domestic

shareholder (see Regulations section 1.964-1(c)(5)(i)) of

the specified group parent (if the specified group parent is

an applicable CFC). With respect to a stand-alone

applicable CFC, each controlling domestic shareholder of

the stand-alone applicable CFC is a designated U.S.

person.

Safe-harbor election. If a safe-harbor election is in

effect with respect to a tax year of a stand-alone

applicable CFC or a specified tax year of a CFC group

member, then, for such year, no portion of the applicable

CFC’s business interest expense is disallowed under the

section 163(j) limitation. See instructions to Worksheet C,

and complete Worksheet C before completing Part I.

If the safe-harbor election is made for a stand-alone

applicable CFC, the U.S. shareholders that file Form 8990

for the stand-alone applicable CFC must attach

Worksheet C to their tax return together with the Form

8990 of the stand-alone applicable CFC and complete

Part I of the stand-alone applicable CFC’s Form 8990 in

accordance with the instructions to Worksheet C. Check

the “Yes” box on line D of the stand-alone applicable

CFC’s Form 8990.

If the safe-harbor election is made for a CFC group, the

U.S. shareholders that file the CFC group’s Form 8990

must attach Worksheet C to their tax return together with

the CFC group’s Form 8990 and complete Part I of the

CFC group’s Form 8990 in accordance with the

8

instructions to Worksheet C. Check the “Yes” box on line D

of the CFC group’s Form 8990.

A safe-harbor election is valid only if made by each

designated U.S. person. The requirement to file the

election statement described in Regulations section

1.163(j)-7(h)(5)(ii) is satisfied by attaching Worksheet C in

compliance with these instructions.

The safe-harbor election is available if a CFC group’s

(or stand-alone applicable CFC’s) business interest

expense is equal to or less than either (a) its business

interest income or (b) 30% of the lesser of (i) its qualified

tentative taxable income (QTTI) or (ii) its eligible amount.

See Regulations section 1.163(j)-7(h)(3). A CFC group is

not eligible for the safe-harbor election if any CFC group

member has a pre-group disallowed business interest

expense carryforward. See Regulations section

1.163(j)-7(k)(19) for the specified period. See Regulations

section 1.163(j)-7(h)(2). See the instructions for

Worksheet C for additional information.

The safe-harbor election does not apply to excess

business interest expense, as described in Regulations

section 1.163(j)-6(f)(2), until the tax year in which it is

treated as paid or accrued by an applicable CFC under

Regulations section 1.163(j)-6(g)(2)(i). Excess business

interest expense is not taken into account for purposes of

this election until a tax year in which it is treated as paid or

accrued by an applicable CFC under Regulations section

1.163(j)-6(g)(2)(i). See Regulations section 1.163(j)-7(h)

for full election rules.

Limitation on pre-group disallowed business interest

expense carryforward. The amount of the pre-group

disallowed business interest expense carryforwards that

may be included in any CFC group member’s business

interest expense deduction for any specified tax year may

not exceed the aggregate section 163(j) limitation for all

specified periods of the CFC group, determined by

reference only to the CFC group member’s items of

income, gain, deduction, and loss, and reduced (including

below zero) by the CFC group member’s business interest

expense (including disallowed business interest expense

carryforwards) taken into account as a deduction by the

CFC group member in all specified tax years in which the

CFC group member has continuously been a CFC group

member of the CFC group (cumulative section 163(j)

pre-group carryforward limitation). See Regulations

section 1.163(j)-7(c)(3)(iv).

U.S. shareholder of an applicable CFC. A U.S.

shareholder of an applicable CFC, in order to arrive at ATI,

must reduce its tentative taxable income, by, among other

items, an amount equal to the sum of any specified

deemed inclusions that were included in the computation

of the taxpayer’s tentative taxable income, reduced by the

portion of the deduction allowed under section 250(a) by

reason of the specified deemed inclusions. See

Regulations section 1.163(j)-1(b)(1)(ii)(G). A specified

deemed inclusion means the inclusion of an amount by a

U.S. shareholder (as defined in section 951(b)) in gross

income under sections 78, 951(a), or 951A(a) with respect

to an applicable CFC that is properly allocable to a

non-excepted trade or business. A specified deemed

inclusion also includes any amount included in a domestic

partnership’s gross income under sections 951(a) or

Instructions for Form 8990 (Rev. 12-2025)

951A(a) with respect to an applicable CFC to the extent

such amounts are attributable to investment income of the

partnership and are allocated to a domestic C corporation

that is a direct (or indirect) partner and treated as properly

allocable to a non-excepted trade or business of the

domestic C corporation.

Section 1.163(j)-7(j) of the 2020 Proposed Regulations

does, however, allow a U.S. shareholder to add to its

tentative taxable income a portion of its specified deemed

inclusions that are attributable to either a stand-alone

applicable CFC or a CFC group member, except to the

extent attributable to an inclusion under section 78 with

respect to an applicable CFC, provided the applicable

requirements are met. That portion is equal to the ratio of

the applicable CFC’s excess taxable income over its ATI.

Change in ATI computation. For tax years beginning

before 2022 and after 2024, ATI is computed without

deductions for depreciation, amortization, depletion, and

any other deduction prescribed in published guidance. For

tax years 2022 through 2024, ATI includes deductions for

depreciation, amortization, or depletion attributable to a

trade or business.

Change from being subject to section 163(j) to being

exempt from section 163(j) under the small business

exemption. A taxpayer that has disallowed business

interest expense from a prior year and meets the small

business exemption in the current year is no longer

required to limit their business interest expense for section

163(j) purposes.

Similarly, a partner with excess business interest

expense from a partnership is not required to limit such

excess business interest expense under section 163(j) if

the partnership meets the small business exemption in the

current year and the partner also meets the small

business exemption in the current year.

Change from non-excepted trade or business to excepted trade or business. If a taxpayer has disallowed

business interest expense from a prior year, or excess

business interest expense from a partnership, for which an

election to be an excepted trade or business is made in

the current year, then the disallowed business interest

expense carried forward, or excess business interest

expense, is still subject to the section 163(j) limitation.

Specific Instructions

If Form 8990 relates to an information return for a foreign

entity (for example, Form 5471), provide the foreign entity

name and appropriate identification number on line A.

If the foreign entity is a CFC group member or if this

Form 8990 is being filed by or on behalf of the specified

group parent to report the combined limitation of the CFC

group, check the “Yes” box and see CFC group election,

earlier, for additional requirements when making a CFC

group election. One of those additional requirements is

that a separate Form 8990 must be completed in order to

report the combined limitation of the CFC group.

If a safe-harbor election is being made, check the “Yes”

box and see Safe-harbor election, earlier, and Worksheet

C, Stand-Alone Applicable CFC/CFC Group Safe Harbor

Election, later, for additional requirements when making a

Instructions for Form 8990 (Rev. 12-2025)

safe-harbor election and special instructions for

completing Part I. If a safe-harbor election is made,

Schedules A and B should not be completed.

Part I—Computation of Allowable

Business Interest Expense

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 the

instructions for Schedule A before completing Part I.

If you are a taxpayer that is a shareholder in an S

corporation subject to the section 163(j) limitation, see the

instructions for Schedule B before completing Part I.

If you are a regulated investment company that paid

section 163(j) interest dividends and that has no business

interest expense for the tax year, complete only Sections I

and III.

Prepare the form in U.S. dollars.

Section I—Business Interest Expense

(Lines 1 Through 5)

Line 1. Current year business interest expense. Enter

the business interest expense including elective

capitalized interest (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 without the application of

section 163(j).

Interest expense from an excepted trade or business

should not be included.

See Ownership of pass-through entities not subject to

the section 163(j) limitation, earlier.

Do not include interest expense allocated by a trading

partnership to a partner that does not materially

participate. See Trading partnerships, earlier.

For C corporations with an interest in a partnership, any

investment interest expense allocated to the C corporation

is treated as business interest expense of the C

corporation from a non-excepted trade or business.

Line 2. Disallowed business interest expense carryforwards from prior years. Enter the prior year

disallowed business interest expense carryover. See Form

8990, line 31, for prior year amount.

For consolidated groups with members joining or

leaving the group, see Regulations section 1.163(j)-5, as

limitations may apply.

Caution: Line 2 does not apply to partnerships.

If Form 8990 is being completed for an applicable CFC

with a functional currency other than the U.S. dollar, and

the amount reported on line 2 is different from the amount

reported on line 31 of the prior year Form 8990 due to the

use of different translation rates for translating from

functional currency to U.S. dollars in different years, attach

a statement providing the amount of the disallowed

business interest expense carryover in functional currency

and the translation rate used in the current year and the

prior year. In the case of a CFC group member, a single

9

statement may be attached to the CFC group’s Form 8990

for all CFC group members in lieu of separate statements

for each CFC group member.

Line 4. Floor plan financing interest expense. Enter

the current year floor plan financing interest expense.

Section II—Adjusted Taxable Income

(Lines 6 Through 22)

Enter all numbers as positive amounts unless otherwise

indicated.

Tentative Taxable Income

Line 6. Tentative taxable income. Enter tentative

taxable income computed as though all of the business

interest expense is otherwise allowable business interest

expense. In figuring tentative taxable income, consider all

other applicable limitations such as sections 163(f), 267,

basis (sections 704 and 1366), at-risk (section 465) and

passive activity loss (section 469), and excess business

loss (section 461(l)) limitations prior to inputting the

tentative taxable income amount.

The tentative taxable income of a partnership or S

corporation shall include both separately and

non-separately stated items. For a partnership, this will

generally be the amount on Form 1065, Analysis of Net

Income (Loss), line 1, Net income (loss), less guaranteed

payments, Schedule K, line 4c. If adjustments to a

partnership’s income or deductions resulting from section

743(b) basis adjustments are taken into account in

calculating a partnership’s net income (loss), remove the

effects of those adjustments by adding or subtracting the

income, gain, loss, or deduction resulting from the section

743(b) basis adjustments. For an S corporation, this will

generally be the amount on Form 1120-S, Schedule K,

line 18, Income/loss reconciliation.

To compute a partnership’s and partner’s ATI, the

partnership (not the partner) takes into account items

resulting from adjustments to property under section

734(b). See Regulations section 1.163(j)-6(d)(2).

However, to compute ATI or items resulting from

adjustments to property under section 743(b), the partner

(not the partnership) takes into account such items.

These adjustments are entered on line 13 (or line 20) of

Form 8990.

Additions (Lines 7 Through 16)

Add back to tentative taxable income certain adjustments

to arrive at ATI. Do not include amounts that were not

taken into account in tentative taxable income on line 6.

See Adjusted taxable income (ATI), earlier.

Line 7. Any item of loss or deduction which is not

properly allocable to a trade or business of the taxpayer. 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 tentative taxable income.

For example, a personal casualty loss is not allocable

to a trade or business of a taxpayer, which would be

10

entered on line 7 as a positive amount to the extent the

casualty loss offset tentative taxable income.

Do not include amounts from pass-through entities,

which are entered on line 12.

Line 8. Any business interest expense not from a

pass-through entity. Add to tentative taxable income all

business interest expense, to the extent includable in

tentative taxable income, that is not from a pass-through

entity. For section 163(j), business interest expense does

not include interest from an excepted trade or business.

Note: Interest expense that is allocable to an excepted

trade or business is not treated as business interest

expense.

Line 9. Amount of any net operating loss deduction

under section 172. Enter the amount of any net

operating loss deduction carried forward or carried back

to the current tax year under section 172.

Line 10. Amount of any qualified business income

deduction allowed under section 199A. Enter the

amount of any qualified business income deduction

allowed under section 199A. To determine ATI, the section

199A deduction on line 10 is determined without regard to

section 163(j). See Regulations section 1.163(j)-1(b)(43).

Line 11. Deduction allowable for depreciation, amortization, or depletion attributable to a trade or business. Enter the 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 line 12.

Line 12. Amount of any loss or deduction items from

a pass-through entity. 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).

Line 13. Other additions. Enter the amount of any

capital loss carryback or carryover.

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 ATI in other additions. See Ownership of

pass-through entities not subject to the section 163(j)

limitation, earlier.

A C corporation should include investment income from

a pass-through entity and any other tax items of a

partnership that are neither properly allocable to a trade or

business of the partnership nor described in section

163(d) and that are allocated to a C corporation partner as

separately stated items as other additions. See C

corporation business interest expense and income,

earlier.

For trusts and estates subject to section 163(j), add

back the amount of any income distribution deduction

under sections 651 and 661, and the deduction under

section 642(c).

The ATI of a beneficiary (including a tax-exempt

beneficiary) of a trust or a decedent’s estate is reduced by

any income (including any distributable net income)

Instructions for Form 8990 (Rev. 12-2025)

received from the trust or estate by the beneficiary to the

extent such income was necessary to permit a deduction

under section 163(j)(1)(B) and Regulations section

1.163(j)-2(b) for any business interest expense of the trust

or estate that was in excess of any business interest

income of the trust or estate.

A U.S. shareholder of an applicable CFC should

include the amount added to the U.S. shareholder’s

tentative taxable income under 2020 Proposed

Regulations section 1.163(j)-7(j). Separately list each

inclusion by stand-alone applicable CFC or CFC group

member.

A relevant foreign corporation should include the

amount of any deduction for foreign income tax (as

defined in Regulations section 1.960-1(b)) that was

included in computing tentative taxable income on line 6

since foreign income taxes should not reduce ATI. See

Regulations section 1.163(j)-7(g)(3).

Also include any other additions described in published

guidance. If none, leave blank.

Line 15. Total current year S corporation shareholder’s excess taxable income. Enter the amount of any S

corporation excess taxable income reported on Form

8990, Schedule B, line 46, column (c).

Reductions (Lines 17 Through 21)

Subtract from tentative taxable income certain

adjustments to arrive at ATI. Do not include amounts that

were not taken into account in tentative taxable income on

line 6. See ATI, defined earlier.

Line 17. Any item of income or gain which is not

properly allocable to a trade or business of the taxpayer. 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, gain from the sale of a taxpayer’s

personal residence would be entered on line 17 because

it is not gain that is allocable to a trade or business of the

taxpayer.

Do not include amounts from pass-through entities,

which will be entered on line 19.

Line 18. Any business interest income not from a

pass-through entity. Enter all business interest income,

to the extent included in tentative taxable income on

line 6, that is not from a pass-through entity (regardless of

whether the entity is subject to the section 163(j)

limitation).

A U.S. shareholder of an applicable CFC should

include an amount equal to the sum of any specified

deemed inclusions that were included in the computation

of the taxpayer’s tentative taxable income, reduced by the

portion of the deduction allowed under section 250(a) by

reason of the specified deemed inclusions. See

Regulations section 1.163(j)-1(b)(1)(ii)(G). Separately list

each reduction by stand-alone applicable CFC or CFC

group member.

Also include any other reductions described in

published guidance. If none, leave blank.

A C corporation should include investment expenses

from a pass-through entity and other tax items of a

partnership that are neither properly allocable to a trade or

business of the partnership nor described in section

163(d) and that are allocated to a C corporation partner as

separately stated items as other reductions. See C

corporation business interest expense and income,

earlier.

Line 22. Adjusted taxable income (ATI). If line 22 is

zero or less, enter zero. However, CFC group members

should follow instructions below.

CFC group members. If a CFC group member has a

negative amount of ATI, the CFC group member should

report the negative amount on line 22. See Regulations

section 1.163(j)-7(c)(2)(i).

Section III—Business Interest Income

(Lines 23 Through 25)

Line 23. Current year business interest income. Enter

the amount of business interest income directly paid to or

accrued by the taxpayer. This does not include interest

income from excepted trades or businesses.

For C corporations with an interest in a partnership, any

investment interest income allocated to the C corporation

is treated as business interest income of the C corporation

from a non-excepted trade or business.

See Ownership of pass-through entities not subject to

the section 163(j) limitation, earlier.

Section IV—163(j) Limitation

Calculations (Lines 26 Through 31)

Limitation on Business Interest Expense

Line 26. Applicable percentage of ATI limitation.

Multiply the ATI from line 22 by the applicable percentage.

The applicable percentage is 30% (30% ATI limitation).

For a partnership or S corporation, if line 26 is zero,

enter -0- on lines 35 and 40.

Line 19. Amount of any income or gain items from a

pass-through entity. Enter the amount of any income or

gain items from pass-through entities.

Allowable Interest Expense

Line 20. Other reductions. Include floor plan financing

interest expense.

For tax years through 2024, ATI is computed with

deductions for depreciation, amortization, depletion, and

any other deduction prescribed in published guidance.

If you are filing Form 8990 for an applicable CFC,

include the amount of any related party dividend income.

See Regulations section 1.163(j)-7(g)(2).

Line 30. Total current year business interest expense

deduction. A taxpayer subject to the section 163(j)

limitation will enter on line 30 the smaller of line 29 or

line 5. Line 30 is the amount of current year business

interest expense deduction allowed after considering the

section 163(j) limitation.

If a partner is not subject to the section 163(j) limitation

and has partnership excess business interest expense

Instructions for Form 8990 (Rev. 12-2025)

11

treated as paid or accrued in the current year, enter the

amount from Schedule A, line 44, column (h). The amount

will not be subject to further limitation under section 163(j).

If the amount on line 29 is less than the amount on

line 5 and business interest expense is reported on more

than one location on the return (such as ordinary business

interest expense and farming interest expense), then the

disallowed business interest expense must be allocated to

each source in proportion to the total amount of business

interest expense from each source. Attach a schedule to

Form 8990 that indicates the amount and line item on the

tax return where the business interest expense is being

deducted.

Carryforward

Line 31. Disallowed business interest expense.

Subtract line 29 from line 5. If zero or less, enter -0-.

Note: The amount on line 31 is used on the taxpayer’s

next year’s Form 8990, line 2 (except for partnerships). If

the taxpayer completing this form is a partnership, carry

the amount on line 31 to Part II, line 32, of the current year

Form 8990.

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 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 1120-S 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 a foreign person that is not a relevant foreign

corporation with an interest in a partnership engaged in a

U.S. trade or business, the amount of excess items is

limited to ECI. For such foreign partners, report on

Schedule A only the ECI portion of the excess section

163(j) amounts and attach a statement showing how the

12

ECI portion of the excess section 163(j) amounts were

determined. See 2020 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

excess business interest income in column (g), reported

to the partner on Schedule K-1 for each partnership.

Do not include excess business interest expense that is

suspended under the basis limitation rules of section

704(d). See Regulations section 1.163(j)-6(h) for basis

adjustment calculations and ordering rules for losses

under section 704(d).

Line 43, column (c). Current year. Reduce the current

year excess business interest expense by the amount of

negative section 163(j) expense that relates to the current

year excess business interest expense, and attach a

statement to the Form 8990 identifying the partnership

name and amount of negative 163(j) expense. See

Regulations section 163(j)-6(h).

Line 43, column (d). Prior year carryforward. From

the prior year’s Form 8990, enter the amount from line 43,

column (i). Increase the prior year carryover by the

amount of negative section 163(j) expense that is no

longer suspended, or if applicable, reduce the prior year

excess business interest expense by the amount of

negative section 163(j) expense that relates to the prior

year excess business interest expense. Attach a

statement to the Form 8990 identifying the partnership

name and a description of the adjustments and the

amounts. See Regulations section 1.163(j)-6(h).

Line 43, column (h). Excess business interest expense treated as paid or accrued. Enter the lesser of:

• The total excess business interest expense amount in

column (e), or

• The current year excess taxable income in column (f)

plus the current year excess business interest income in

column (g) from the same partnership.

In addition, add any of the applicable amounts listed

below, and attach a statement to the Form 8990

identifying the partnership name, amount, and description

of addition.

• The amount of excess business interest expense

carryover on line 43(d) if the partnership became an

exempt entity during the tax year. See Regulations section

1.163(j)-6(m)(3).

• Any business interest expense that is treated in the

current tax year, as paid or accrued under the transition

rule of regulation for trading partnerships. See

Regulations section 1.163(j)-6(c)(3).

Line 43, column (i). Current year excess business interest expense carryforward. Columns 43(e) minus (h),

less any excess business interest expense that previously

reduced partner basis that you are required to make a

basis adjustment to upon disposition of partnership

interest. See Regulations section 1.163(j)-6(h)(3).

Line 44, column (f). Total current year excess taxable

income. If the partner is subject to the section 163(j)

limitation, add the amounts entered on line 43, column (f),

Instructions for Form 8990 (Rev. 12-2025)

for all partnerships listed. Enter this total amount on Part I,

line 14.

Line 44, column (g). Total current year excess business interest income. For the partners subject to the

section 163(j) limitation, add the amounts entered on

line 43, column (g), for all partnerships listed. Combine

this total amount with Schedule B, line 46, column (d), and

enter the total on Part I, line 24.

Line 44, column (h). Total excess business interest

expense treated as paid or accrued. For the partners

subject to the section 163(j) limitation, add the amounts

entered on line 43, column (h), for all partnerships listed.

Enter this total amount on Part I, line 3. For partners not

subject to the section 163(j) limitation, include this amount

on Part I, line 30.

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.

Line 46, column (c). Total current year excess taxable

income. Add the amounts entered on line 45, column (c),

for all S corporations listed. Enter this total amount on Part

I, line 15.

Line 46, column (d). Total current year excess business interest income. Add the amounts entered on

line 45, column (d), for all S corporations listed. Combine

this total amount with Schedule A, line 44, column (g) and

enter the total on Part I, line 24.

Worksheet A—Determination of Each

Partner’s Deductible Business

Interest Expense and Section 163(j)

Excess Items and Worksheet

B—Determination of Each Partner’s

Relevant Section 163(j) Items

The 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.

The Regulations provide that deductible business interest

expense and section 163(j) excess items must be

allocated in accordance with the 11-step computation

shown in Worksheets A and B. See 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. Partnerships that

allocate all section 163(j) items in step 2 proportionately

do not need to use Worksheets A and B.

Instructions for Form 8990 (Rev. 12-2025)

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 ATI, 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 Regulations section 1.163(j)-6(f)(2)(ii) for

the definitions of “allocable ATI” (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

excess business interest income to the partners.

The calculation in Regulations sections 1.163(j)-6(f)(2)

(i) through (xi) is solely for 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 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.

Worksheet C—Stand-Alone

Applicable CFC/CFC Group Safe

Harbor Election

Worksheet C is used to determine eligibility for the

safe-harbor election under Regulations section

1.163(j)-7(h). Fill out Section 1 to indicate the type of

election. Sections 2, 3, 4, and 5 determine eligibility. If the

safe-harbor election is made for a stand-alone applicable

CFC, the U.S. shareholders that file Form 8990 for the

stand-alone applicable CFC must attach Worksheet C to

their tax returns together with the Form 8990 of the

stand-alone applicable CFC and complete Part I of the

stand-alone applicable CFC’s Form 8990 in accordance

with these instructions for Worksheet C. If the safe-harbor

election is made for a CFC group, the U.S. shareholders

that file the CFC group’s Form 8990 must attach

Worksheet C to their tax return together with the CFC

group’s Form 8990 and complete Part I of the CFC group’s

Form 8990 in accordance with these instructions for

Worksheet C.

Complete Worksheet C before completing Part I of

Form 8990. Complete lines A through D of Form 8990 in

accordance with the instructions discussed earlier in

Specific Instructions and complete the remainder of Form

8990 in accordance with the instructions below. If a

safe-harbor election is made, Schedules A and B should

not be completed.

A safe-harbor election may be made only for a

stand-alone applicable CFC or for a CFC group. Thus, for

example, it may not be made for an applicable CFC that is

a specified group member if a CFC group election is not in

13

effect, and it may not be made for any CFC group member

unless it is made with respect to the CFC group as a

whole.

For purposes of the safe-harbor election, all items must

be determined using the U.S. dollar. If business interest

income, business interest expense, or any items that are

taken into account in computing QTTI are maintained in a

currency other than the U.S. dollar, then those items must

be translated into the U.S. dollar using the average

exchange rate for the tax year (or specified year, as

applicable).

Line A. Stand-alone election. Check the box if the

election is made for a stand-alone applicable CFC. A

stand-alone applicable CFC is an applicable CFC that is

not a specified group member and therefore not eligible to

be a CFC group member.

Line B. CFC group election. Check the box if the

election is made for a CFC group.

Line C. If a CFC group election has been made, for the

specified period, does any CFC group member have any

pre-group disallowed business interest expense

carryforward? If yes, the CFC group is not eligible for the

safe-harbor.

Line 1. Business interest income. Enter the

stand-alone applicable CFC’s business interest income if

a stand-alone election is being calculated. Enter the CFC

group’s business interest income if a CFC group election

is being calculated. Also enter the amount from line 1 on

Form 8990, line 25.

Line 2. Business interest expense. Enter the

stand-alone applicable CFC’s business interest expense if

a stand-alone election is being calculated. Enter the CFC

group’s business interest expense if a CFC group election

is being calculated. Also enter the amount from line 2 on

Form 8990, line 5.

Line 3. Subtract line 2 from line 1. If the amount on

line 3 is greater than or equal to zero, the safe-harbor

requirement is met if all other eligibility requirements are

met. Check “Yes” on Form 8990, line D. Skip lines 4

through 14, and continue to line 15. Leave the remaining

lines of Form 8990, Part I (all lines other than line 5 and

line 25) blank.

If the amount on line 3 is less than zero, continue to

line 4.

Line 4. Qualified tentative taxable income (QTTI).

Enter the stand-alone applicable CFC’s QTTI if a

stand-alone election is being calculated. Enter the CFC

group’s QTTI if a CFC group election is being calculated.

Also enter the amount from line 4 on Form 8990, line 6.

With respect to a stand-alone applicable CFC, QTTI

means an applicable CFC’s tentative taxable income for

the tax year, determined by taking into account only items

properly allocable to a non-excepted trade or business.

With respect to a CFC group, QTTI means the sum of

each CFC group member’s tentative taxable income for

the specified tax year, determined by taking into account

only items properly allocable to a non-excepted trade or

business. See Regulations section 1.163(j)-7(h)(4).

14

Line 5. Thirty percent of QTTI. Multiply QTTI from line 4

by 30% (0.30).

General instructions for lines 6 through 9. The

amounts on lines 6 through 9 are determined based on

the amounts that would be included and deducted by a

hypothetical domestic corporation if the domestic

corporation had a tax year ending on the last date of the

tax year of the stand-alone applicable CFC (or specified

period of the CFC group), it wholly owned the stand-alone

applicable CFC throughout the CFC’s tax year (or wholly

owned each CFC group member throughout the CFC

group member’s specified tax year), it did not own any

assets other than stock in the stand-alone applicable CFC

(or CFC group members), and it had no other items of

income, gain, deduction, or loss. Additionally, the amounts

on lines 6 through 9 are determined by taking into account

any elections that are made with respect to the applicable

CFC(s), including under Regulations section 1.954-1(d)(5)

(relating to the subpart F high-tax exception) and

Regulations section 1.951A-2(c)(7)(viii) (relating to the

GILTI high-tax exclusion). These amounts are also

determined without regard to any section 163(j) limitation

on business interest expense and without regard to any

disallowed business interest expense carryovers. In

addition, those amounts are determined by only taking

into account items of the applicable CFC(s) that are

properly allocable to a non-excepted trade or business

under Regulations section 1.163(j)-10. See Regulations

section 1.163(j)-7(h)(3).

Line 6. Section 951(a)(1)(A) amount. Include on line 6

amounts that would be includable by the hypothetical

domestic corporation under section 951(a)(1)(A).

Line 7. Section 951A(a) amount. Include on line 7

amounts that would be includable by the hypothetical

domestic corporation under section 951A(a).

Line 8. Section 250 amount. Include on line 8 any

deduction that would be allowed for the hypothetical

domestic corporation under section 250(a)(1)(B)(i).

Line 9. Section 245A amount. Include on line 9 any

deduction that would be allowed for the hypothetical

domestic corporation under section 245A (by reason of

section 964(e)(4)).

Line 10. Total eligible amount. Combine lines 6

through 9. Enter the amount on Form 8990, line 22.

Line 11. Thirty percent of eligible amount. Multiply the

eligible amount (line 10) by 30% (0.30).

Line 12. Enter the lesser of line 5 or line 11.

Line 13. Business interest expense. Enter the amount

from line 2.

Line 14. Subtract line 13 from line 12. If the amount on

line 14 is greater than or equal to zero, the safe-harbor

requirement is met if all other eligibility requirements are

met. Check “Yes” box on Form 8990, line D, and continue

to line 15. Leave the remaining lines of Form 8990, Part I

(all lines other than lines 5, 6, 22, and 25) blank.

If the amount on line 14 is less than zero, the

safe-harbor eligibility requirements are not met.

Instructions for Form 8990 (Rev. 12-2025)

Line 15. Name(s) of all designated U.S. persons.

Enter the name(s) of all designated U.S. persons. Attach

an additional statement if necessary.

Line 16. Taxpayer identification number(s) of line 15.

Enter the taxpayer identification number(s) for all persons

listed on line 15. Attach an additional statement if

necessary.

Line 17. Tax year or specified period (as applicable).

Enter the stand-alone applicable CFC’s tax year or the

CFC group’s specified period to which the election relates.

Instructions for Form 8990 (Rev. 12-2025)

Average Annual Gross Receipts Worksheet Per

Section 448(c)

1.Annual gross receipts

Column A

Column B

Column C

1st

preceding

tax year

2nd

preceding

tax year

3rd

preceding

tax year

$

$

$

2.Plus annual gross receipts of

related entities per

$

aggregate rules

$

$

3.Total annual gross receipts

$

$

$

4.Average annual gross

receipts (line 3 columns A +

B + C divided by 3)

$

15

Determination of Each Partner’s Deductible Business Interest Expense

and Section 163(j) Excess Items—Worksheet A

Keep for Your Records

Before you begin: ✓ Complete Form 8990 before beginning this worksheet.

✓ This worksheet provides space for up to three partners. If there are more than three partners, use more than

one worksheet. The total column should reconcile to amounts for all partners.

Partner 1

Partner 2

Partner 3

Total

Step 1: Partnership‐level calculation required by section 163(j)(4)(A).

1. Partnership’s Adjusted Taxable Income (ATI) (Form 8990, line 22)

2. Partnership’s business interest income (Form 8990, line 25) .

3. Partnership’s business interest expense (Form 8990, subtract

line 4 from line 5)

. . . . . . . . . . . . .

4. Partnership’s deductible business interest expense (Form 8990,

subtract line 4 from line 30) . . . . . . . . . . .

5. Partnership’s excess business interest expense (Form 8990, line 32)

6. Partnership’s excess taxable income (Form 8990, line 36)

.

7. Partnership’s excess business interest income (Form 8990, line 37)

Step 2: Determine each partner’s section 163(j) items.

8. Partner’s allocable ATI. See instructions . . . . . . .

9. Partner’s allocable business interest income. See instructions

10. Partner’s allocable business interest expense. See instructions

Step 3: Partner‐level comparison of business interest income and business interest expense.

11. Subtract line 10 from line 9. (If zero or less, enter ‐0‐.) .

12. Subtract line 9 from line 10. (If zero or less, enter ‐0‐.) .

.

.

.

.

Step 4: Matching partnership and aggregate partner excess business interest income.

13. Divide line 11 by the line 11 total column amount. (If the total

column equals zero, enter ‐0‐.)

. . . . . . . . .

14. Multiply line 13 by the line 12 total column amount . .

15. Subtract line 14 from line 11. (If zero or less, enter ‐0‐.)

.

.

%

%

%

%

%

%

%

%

%

%

%

%

.

.

Step 5: Remaining business interest expense determination.

16. Divide line 12 by the line 12 total column amount. (If the total

column equals zero, enter ‐0‐.)

. . . . . . . . .

17. Multiply line 16 by the line 11 total column amount . .

18. Subtract line 17 from line 12. (If zero or less, enter ‐0‐.)

.

.

.

.

Step 6: Determination of final allocable ATI.

19. If line 8 is greater than or equal to $0, enter the amount from

line 8. Otherwise, enter ‐0‐ . . . . . . . . . . .

20. If line 8 is less than $0, enter the absolute value of line 8.

Otherwise, enter ‐0‐ . . . . . . . . . . . . .

21. Divide line 19 by the line 19 total column amount. (If the total

column equals zero, enter ‐0‐.)

. . . . . . . . .

22. Multiply line 21 by the line 20 total column amount . .

23. Subtract line 22 from line 19. (If zero or less, enter ‐0‐.)

.

.

.

.

Step 7: Partner‐level comparison of the applicable percentage of ATI and remaining business interest expense.

24. Multiply line 23 by the applicable percentage (defined earlier)

25. Subtract line 18 from line 24. (If zero or less, enter ‐0‐.)

. .

26. Subtract line 24 from line 18. (If zero or less, enter ‐0‐.)

. .

16

Instructions for Form 8990 (Rev. 12-2025)

Determination of Each Partner’s Deductible Business Interest Expense

and Section 163(j) Excess Items—Worksheet A—Continued

Partner 1

Keep for Your Records

Partner 2

Partner 3

Total

Step 8: Partner priority right to ATI capacity excess determination.

27a. Is the line 5 total column amount greater than zero?

27b. Is the line 20 total column amount greater than zero?

27c. Is the line 26 total column amount greater than zero?

Yes

Yes

Yes

Yes

No

No

No

No

27d. Are lines 27(a), 27(b), and 27(c) all “Yes”? .

28. If line 27d is “No,” enter the amount from line 25. Otherwise,

complete Worksheet B . . . . . . . . . . . .

29. If line 27d is “No,” enter the amount from line 26. Otherwise,

complete Worksheet B . . . . . . . . . . . .

30. If line 27d is “No,” enter -0-. Otherwise, complete Worksheet B

Step 9: Matching partnership and aggregate partner excess taxable income.

31. Divide line 28 by the line 28 total column amount. (If the total

column equals zero, enter -0-.)

. . . . . . . . .

32. Multiply line 31 by the line 29 total column amount . .

33. Subtract line 32 from line 28. (If zero or less, enter -0-.)

.

.

%

%

%

%

%

%

%

.

.

Step 10: Match partnership and aggregate partner excess business interest expense.

34. Divide line 29 by the line 29 total column amount. (If the total

column equals zero, enter -0-.)

. . . . . . . . .

%

35. Multiply line 34 by the line 28 total column amount . . . .

36. If line 30 is greater than zero, enter the amount from line 30.

Otherwise, subtract line 35 from line 29. (If zero or less, enter -0-.)

Step 11: Final section 163(j) excess item and deductible business interest expense allocation.

37. Partner’s deductible business interest expense. Subtract line

36 from line 10 . . . . . . . . . . . . . .

38. Partner’s excess business interest expense. Enter the amount

from line 36 . . . . . . . . . . . . . . .

39. Partner’s excess taxable income. Multiply line 33 by (10/3) .

40. Partner’s excess business interest income. Enter the amount

from line 15 . . . . . . . . . . . . . . .

Note.

• Line 3: Equals the partnership’s business interest expense, not taking into account floor plan financing interest expense. From Form 8990,

subtract line 4 from line 5.

• Line 4: Equals the partnership’s deductible business interest expense, not taking into account floor plan financing interest expense. From

Form 8990, subtract line 4 from line 30.

• Line 8: Equals “allocable ATI” as defined in Proposed Regulations section 1.163(j)‐6(f)(2)(ii).

• Line 9: Equals “allocable business interest income” as defined in Proposed Regulations section 1.163(j)‐6(f)(2)(ii). The line 9 total column

amount must equal the line 2 total column amount.

• Line 10: Equals “allocable interest expense” as defined in Proposed Regulations section 1.163(j)‐6(f)(2)(ii). The line 10 total column amount

must equal the line 3 total column amount.

• Line 23: The line 23 total column amount must equal the line 1 total column amount.

• Line 27d: If line 27d is “Yes,” the partnership must complete Worksheet B (in order to get the correct values for lines 28–30) before proceeding

to line 31 of Worksheet A.

• Line 37: The line 37 total column amount must equal the line 4 total column amount.

• Line 38: The line 38 total column amount must equal the line 5 total column amount.

• Line 39: The line 39 total column amount must equal the line 6 total column amount.

• Line 40: The line 40 total column amount must equal the line 7 total column amount.

• The lines 13, 16, 21, 31, and 34 total column amount must equal 100% or zero.

Instructions for Form 8990 (Rev. 12-2025)

17

Determination of Each Partner’s Relevant

Section 163(j) Items—Worksheet B

Keep for Your Records

Before you begin: ✓ Complete “Determination of Each Partner’s Deductible Business Interest Expense and Section 163(j)

Excess Items—Worksheet A” before beginning this worksheet.

✓ This worksheet provides space for up to three partners. If there are more than three partners, use more than

one worksheet. The total column should reconcile to amounts for all partners.

Step 8A: Who must complete this worksheet.

1. If the answer to line 27(d) of Worksheet A is “Yes,” complete

this worksheet.

Partner 1

Partner 2

Partner 3

Total

Step 8B: Determine whether to perform Step 8C or Step 8D.

2. Subtract line 23 of Worksheet A from line 19 of Worksheet A .

3. Multiply line 2 of Worksheet B by the applicable percentage .

4. If line 26 of Worksheet A is greater than zero, enter the amount

from line 3 of Worksheet B. Otherwise, enter -0- . . . .

5. Enter the smaller of line 4 of Worksheet B or line 26 of

Worksheet A . . . . . . . . . . . . . . .

6. If the line 25 total column amount of Worksheet A is greater

than or equal to the line 5 total column amount of Worksheet

B, complete Step 8C of Worksheet B. If the line 5 total column

amount of Worksheet B is greater than the line 25 total column

amount of Worksheet A, complete Step 8D of Worksheet B.

Step 8C: Calculate lines 28, 29, and 30 of Worksheet A. Return to and complete Worksheet A after Step 8C.

7. Divide line 25 of Worksheet A by the line 25 total column

amount of Worksheet A. (If the line 25 total column amount of

Worksheet A equals zero, enter -0-.) . . . . . . . .

%

%

%

%

8. Multiply line 7 of Worksheet B by the line 5 total column

amount of Worksheet B

. . . . . . . . . . .

9. Subtract line 8 of Worksheet B from line 25 of Worksheet A.

Enter the amount(s) on line 28 of Worksheet A . . . . .

10. Subtract line 5 of Worksheet B from line 26 of Worksheet A.

Enter the amount(s) on line 29 of Worksheet A . . . . .

11. Enter ‐0‐ on line 30 of Worksheet A.

Step 8D: Calculate lines 28, 29, and 30 of Worksheet A. Return to and complete Worksheet A after Step 8D.

12. Divide line 4 of Worksheet B by the line 4 total column amount

of Worksheet B. (If the line 4 total column amount of

Worksheet B equals zero, enter -0-.) . . . . . . . .

13. Multiply line 12 of Worksheet B by the line 25 total column

amount of Worksheet A

. . . . . . . . . . .

14. If line 4 of Worksheet B is greater than zero, enter the amount

from line 26 of Worksheet A. Otherwise, enter -0- . . . .

15. Subtract line 14 of Worksheet B from line 13 of Worksheet B.

(If zero or less, enter -0-.) Enter the amount(s) on line 28 of

Worksheet A . . . . . . . . . . . . . . .

16. Subtract line 13 of Worksheet B from line 14 of Worksheet B.

(If zero or less, enter -0-.) Enter the amount(s) on line 29 of

Worksheet A . . . . . . . . . . . . . . .

17. If line 4 of Worksheet B equals zero, enter the amount from

line 26 of Worksheet A. Otherwise, enter -0-. Enter the

amount(s) on line 30 of Worksheet A . . . . . . . .

18

Instructions for Form 8990 (Rev. 12-2025)

Stand-Alone Applicable CFC/CFC Group Safe Harbor Election

Section 163(j) Items—Worksheet C

Name of foreign entity

Employer identification number, if any

Attach to Your Return

Reference ID number

Section 1—Type of Safe-Harbor Election

A. Stand-alone election

B. CFC group election

C. If CFC group election has been made, for the specified period, does any CFC group member have any pre-group disallowed

Yes

No

business interest expense carryforward?

If “Yes,” STOP; the CFC group is not eligible for safe-harbor.

Section 2—Business Interest Income Safe-Harbor Calculation

1 Business interest income

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2 Business interest expense .

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3 Subtract line 2 from line 1. See instructions . . . . . .

Section 3—Qualified Tentative Taxable Income Calculation

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4 Qualified tentative taxable income

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5 Multiply qualified tentative taxable income (line 4) by the applicable percentage. See instructions

Section 4—Eligible Amount Calculation

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6 Section 951(a)(1)(A) amount

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7 Section 951A(a) amount

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8 Section 250 amount .

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9 Section 245A amount

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10 Total eligible amount. Combine lines 6 through 9

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11 Multiply eligible amount (line 10) by the applicable percentage. See instructions .

Section 5—Safe-Harbor Calculation

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12 Enter the lesser of line 5 or line 11

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13 Business interest expense .

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14 Subtract line 13 from line 12. See instructions . . . . . . . . . . . . . .

Section 6—Name and Taxpayer Identification Number of All Designated U.S. Persons

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15 Name(s) of all designated U.S. persons

16 Taxpayer identification number(s) of persons on line 15

17 Taxable year or specified period (as applicable)

Instructions for Form 8990 (Rev. 12-2025)

19

Paperwork Reduction Act Notice. We ask for the

information on this form to carry out the Internal Revenue

laws of the United States. You are required to give us the

information. We need it to ensure that you are complying

with these laws and to allow us to figure and collect the

right amount of tax.

You are not required to provide the information

requested on a form that is subject to the Paperwork

Reduction Act unless the form displays a valid OMB

control number. Books or records relating to a form or its

instructions must be retained as long as their contents

may become material in the administration of any Internal

Revenue law. Generally, tax returns and return information

are confidential, as required by section 6103.

20

The time needed to complete and file this form will vary

depending on individual circumstances. The estimated

burden for business taxpayers filing this form is approved

under OMB control number 1545-0123 and is included in

the estimates shown in the instructions for their business

income tax return.

If you have comments concerning the accuracy of

these time estimates or suggestions for making this form

simpler, we would be happy to hear from you. See the

instructions for the tax return with which this form is filed.

Instructions for Form 8990 (Rev. 12-2025)