IRS Form 8990 Schedule A walkthrough (Partnerships subject to Section 163(j) limitations)

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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 section163(j) amounts and attach a statement showing how the ECI portion of the excess Section 163(j) amounts were determined.

[@teachmepersonalfinance2169]

Please feel free to check out our article, where we've written step by step instructions to help you walk through the entire tax form! www.teachmepersonalfinance.com/irs-form-8990-instructions/

[@user-sj2dv1gk2w]

Where do you report line 30 amount on your Form 1040? Do you add an additional K-1 to report the paid einterest from that partnership?

[@MehrdadSarlak]

Great job walking through this and really appreciate it. The question I have is then what do you do with the number and line 30? Where on your tax form does that go? Does it end up somewhere on the 1040 or other schedule?

[@teachmepersonalfinance2169]

You would deduct your interest expense where you would normally do so, depending on the nature of the interest and what type of business or investment income is associated. Most likely, this would be interest deducted on Schedule E or Schedule C (see below links).
The primary thing about Form 8990 is that it serves as a limitation on the amount of interest you can deduct in the current year. Any interest that's disallowed in the current year must be carried forward to future tax years.
IRS Schedule C, Profit or Loss from Business
Article: www.teachmepersonalfinance.com/irs-schedule-c-instructions/
Video: th-cam.com/video/T3KYF24chIg/w-d-xo.html
IRS Schedule E, Supplemental Income
Article: www.teachmepersonalfinance.com/irs-schedule-e-instructions/
Video: th-cam.com/video/mHH-0QuB3EU/w-d-xo.html

[@MehrdadSarlak]

@@teachmepersonalfinance2169 thank you so much. In my specific case, I made the mistake of buying some shares of SUN stock without realizing it's a PTP....so my question is arising because on line 13 of the PTP's K-1, code K is EXCESS BUSINESS INTEREST EXPENSE and I need to do 8990 as you said to determine how much of it I can write off...so given that it's from line 13K of a PTP's K-1, where on my general taxes would I write off whatever is allowed from the 8990?

[@teachmepersonalfinance2169]

@@MehrdadSarlak Without knowing more about your tax situation, I would probably guess that Schedule E would be the place I'd look into first. But I'd also recommend sitting down with a tax professional to go through your tax situation so you can make the right decision.

[@davidmoolekampcpa3370]

thank you, have a nice day

[@teachmepersonalfinance2169]

Thank you! You too!

[@indazen]

None of this makes sense to me. I can't find the information on my k1 to coincide to fill in the blanks for the schedule A. How do you figure current year excess taxable income or current year excess business income. I don't see those on the schedule K1. I wish I never would have bought these stocks that are partnerships

[@teachmepersonalfinance2169]

You actually have to go to the K-1 instructions for Form 1065 (partnerships). From there, you'll find the necessary items as follows:
Excess business interest expense (Column C on Form 8990, Schedule A): If applicable, this will be in Box 13 (Other Deductions), marked with Code K, excess business interest expense.
Excess taxable income (Column F on Form 8990, Schedule A): If applicable, this will be in Box 20 (Other Information), marked with Code AE, excess taxable income.
Excess business interest income (Column G on Form 8990, Schedule A): If applicable, this will be in Box 20 (Other Information), marked with Code AF, excess business interest income.
If there is anything else impacting Form 8990, Schedule A, you should see it in Box 20, marked with Code AH, Other Information.
I hope this helps!

[@kayfernandez7253]

@@teachmepersonalfinance2169 Good evening. Thank you for making some sense of this. This is my first year with a partnership. On my K1 in box 13 I have code K $2692
in box 20 I have code N $1658
U STMT
Z STMT
AG $39,919.
So does that mean that on Schedule A Column C is $2692. Column D is zero. Column E is $2692. and Columns F through I are zero?

[@teachmepersonalfinance2169]

@@kayfernandez7253 This appears to be correct, if these are the only codes reported on your K-1. Box 13, Code N reports your excess business interest expense, reported in Column C.
It appears that none of the items reported to you in Box 20 would go into Form 8990.
Box 20, Code N is reported to you for information purposes only. Any amounts reported to you under Code U are for Section 743(b) reporting, if that applies to you. Items in Code Z might be helpful in calculating any QBI deduction on IRS Form 8995 or 8995-A, as applicable. Code AG is reported to you for gross receipts test purposes.

[@kayfernandez7253]

@@teachmepersonalfinance2169 Thank you. Does that mean there is nothing to report/no change to/on form 1040?

[@teachmepersonalfinance2169]

@@kayfernandez7253 You may need to discuss this with your tax professional. There seem to be several areas where your Form 1040 might be impacted, but identifying exactly where...that is probably outside the scope of assistance that I can provide.

[@user-sj2dv1gk2w]

Where do you report line 30 amount on your Form 1040? Do you add an additional K-1 to report the paid interest from that partnership on Sch E page 2?

[@teachmepersonalfinance2169]

Because the Section 163(j) limitation is applied at the partnership level or S-corporation level, it is reported to partners or S-corporation shareholders on their K-1. Amounts disallowed in the current tax year are carried over to the following tax year's Form 8990.

[@user-sj2dv1gk2w]

@@teachmepersonalfinance2169 Thank you for the reply but I am still confused. How do you report paid interest from form 8990 line 30 at partner level, which was carried forwarded from prior year. Please clarify.

[@teachmepersonalfinance2169]

I'm not sure I understand your question. Line 30 contains current year interest expense deduction, which is the lower of either the total business interest expense deduction, or the business interest expense after limitations. But Line 2 (disallowed business interest expense carryforwards from prior years states that carryforwards do not apply to a partnership.
According to the form instructions, "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."
One exception to this might be Excess business interest expense from a prior tax year that was suspended under section 704(d) (“negative Section 163(j) expense”). However, Treasury Regulations section 1.163(j)-6(h) would have more guidance for basis adjustment calculations and ordering purposes.
Looking at the Schedule K-1 instructions for Form 1065, it appears that business interest expense goes into a couple of places, whether deductible or excess.
1) Deductible business interest expense is used in the basis worksheet calculation (From the IRS instructions: For tax years beginning after November 12, 2020, the partnership will report your share of the partnership's deductible business interest expense for inclusion in the separate loss class for computing any basis limitation (defined in section 704(d), Regulations section 1.163(j)-6(h)). This also appears to be entered in Box 20 with Code N. According to the form instructions, there should be an accompanying statement that allocates the business interest expense already deducted by the partnership.
2) Excess business interest expense is entered in Box 13 with Code K. This appears to be applied to basis, after deductible business interest expense.

[@davidwang5921]

@@teachmepersonalfinance2169 Thank you for your video. Does the line 30 help to reduce my tax on form 1040? If it does, how to use it on form 1040? Thank you!