Small businesses—those with average annual gross receipts in the 3 prior years not exceeding a set amount ($26 million in 2020)—are exempt from the limit on deducting interest expenses. However, aggregation rules combine the gross receipts of multiple taxpayers if they are treated as a single employer under a controlled group. IRS FAQs clarify how the aggregation rules operate for different entities (e.g., corporations, partnerships, sole proprietorships).
Barbara Weltman
Big Ideas for Small Business, Inc.
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