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Does Pennsylvania follow the federal tax treatment of interest expenses?

Mar 18, 2019, 09:32 AM by Harold P. Eck, CPA
Answer from the free Ask a CPA service on whether Pennsylvania follows the federal tax treatment of interest expenses.

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.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Harold P. Eck, CPA, is an individual practitioner in Jersey Shore, Pa.