Consider Your Leverage
For asset-based carriers trucking is usually a high leverage business. It involves constant equipment trade cycles that often requires financing to be able to afford the costs or protect cash reserves. With inflation and technological improvements, we have seen equipment costs rise and expect that trend to continue. Why do I mention this? Because interest on all that leverage may not be immediately deductible if you are subject to the business interest expense limitation.
The business interest expense limitation is nothing new. It was implemented with the Tax Cuts and Jobs Act for years beginning after December 31, 2017. It hasn’t been an issue for most because depreciation has been an addback in determining the limitation. For 2022, depreciation will no longer be an addback meaning a calculation of the limitation will likely be based on a significantly smaller number. Transportation companies often have a large amount of depreciation due to the capital intensive nature of the industry. To learn more about the interest expense limitation and get a feel for if you may be effected read Deducting Business Interest: The Quandary for 2022 and reach out to a CLA tax professional if you have any questions.
Nathan is a CPA and has more than ten years of experience providing tax planning, consulting and compliance services to a number of privately held businesses and individuals in a variety of industries, with a special focus on the transportation and logistics industry. He actively communicates with clients and seeks ways to align their individual and business goals with available tax strategies to allow them to make well-informed decisions.
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