In September the IRS released final regulations that clarify bonus depreciation and interest expense for dealerships with floor plan financing. To the extent that overall interest expense, including floorpan interest, is below 30% of adjusted taxable income, a dealership will be able to take a 100% bonus depreciation. Eligibility is determined on an annual basis, so even if a dealership has to use the floor plan exception one year in order to deduct all of its interest expense (losing the ability to take bonus depreciation that year), it may still be eligible to take bonus depreciation in subsequent years if overall interest expense falls below 30% of adjusted taxable income in a given year.
According to a report in the November United Voice Equipment Dealer Assn. newsletter by HBK CPAs and Consultants, the ruling clarifies conflicting language and is good news for dealers with floor plan financing.