Interest expense is limited on federal Form 1065 by Section 163(j). Does Pennsylvania follow the federal treatment, or can I deduct the disallowed federal interest expense on my Pennsylvania return via an adjustment on Schedule M?
Federal Section 163(j) applies to taxpayers with average annual gross receipts in excess of $25 million.
Pennsylvania does not follow the federal regulations concerning a limit on deductible business interest expense. The disallowed federal interest should be added back to expense on Schedule M, Part B, Section F, Line I.
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Answered by: Harold P. Eck, CPA, is an individual practitioner in Jersey Shore, Pa.