# Instructions for Form 8990

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- **Document type:** Agency decision

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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.
3

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.
4

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.

5

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
6

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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2

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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3

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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8

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9 Section 245A amount

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(

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10 Total eligible amount. Combine lines 6 through 9

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10

11 Multiply eligible amount (line 10) by the applicable percentage. See instructions .
Section 5—Safe-Harbor Calculation

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11

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)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A523a7602f5188519. Public record. Not legal advice.