Does TurboTax Really Support Form 8990? – Avoid This Mistake + FAQs

TurboTax does not support Form 8990 directly in most of its consumer versions, especially for complex or business filers.

This means taxpayers affected by the Business Interest Expense limitation (under IRC §163(j)) often face extra steps to file correctly. Form 8990 is required to calculate how much interest expense is deductible when the law caps it at 30% of income.

Yet, despite the law impacting hundreds of thousands of returns (the Joint Committee on Taxation projected the §163(j) cap would raise over $250 billion in taxes in a decade), major DIY tax software still hasn’t caught up. Here’s the situation at a glance:

• 😟 Widespread frustration: Many filers are surprised to learn TurboTax can’t e-file Form 8990, often discovering this late in the process when a K-1 or business entry triggers the form requirement.

• 🏢 Behind the law: Form 8990 enforces the 30% business interest deduction limit (Section 163(j)), a rule from the Tax Cuts and Jobs Act that curbs interest write-offs for large businesses, partnerships, and certain real estate or fund investors.

• 💡 Niche requirement: Only larger or highly-leveraged operations typically need Form 8990 – small businesses below the gross receipts threshold (about $25–30 million average revenue) are exempt, so most TurboTax users never encounter it.

• 🛠️ Manual workaround: If you do need Form 8990, TurboTax users must often fill it out manually and file by mail. TurboTax’s personal editions don’t include it or allow PDF attachments, forcing a print-and-mail solution or use of advanced software.

• 🤝 Alternative solutions: Sophisticated alternatives like Intuit’s ProConnect Tax or Lacerte, or hiring a professional CPA, fully support Form 8990. Many frustrated TurboTax users ultimately turn to tax pros or these platforms to ensure compliance.

What is Form 8990 and Why It Matters

Form 8990 is the IRS form titled “Limitation on Business Interest Expense Under Section 163(j)”. It is used to calculate how much of a business’s interest payments can be deducted in the current tax year and how much gets carried forward due to the section 163(j) limitation.

This limitation was introduced by the Tax Cuts and Jobs Act (TCJA) to prevent businesses from claiming excessive interest deductions. In essence, it generally caps deductible business interest expense at 30% of Adjusted Taxable Income (ATI) plus any business interest income (and some other minor adjustments like floor plan financing interest for auto dealers). Any interest above that ceiling becomes disallowed for the year.

Form 8990 matters because it’s the mechanism by which taxpayers report and carry forward these disallowed interest amounts. The form ensures that taxpayers don’t deduct more interest than allowed and keeps track of any excess business interest for future years.

For example, if a company paid $1,000,000 in interest but was limited to $800,000 based on its income, Form 8990 would show $200,000 as disallowed interest to carry forward. That carried-forward amount could potentially be deducted in a future year if there’s enough income capacity, but only if it’s properly reported and tracked on Form 8990 each year.

The federal context here is IRC §163(j), a tax code provision that was significantly expanded by TCJA in 2018. Before 2018, interest deduction limits existed mostly for very specific situations (like certain foreign-owned corporations under older earnings stripping rules).

After TCJA, §163(j) became broad, affecting many businesses with debt. Important aspects of this law include:

• Adjusted Taxable Income (ATI): This is essentially taxable income before interest, taxes, depreciation, and amortization for years up through 2021 (mirroring EBITDA). Starting in 2022, depreciation and amortization are no longer added back, making it a stricter EBIT-based measure. This change means more businesses can hit the 30% limit as their ATI is effectively lower now.

• 30% limitation: In normal times, the cap is 30% of ATI. (There was a temporary 50% cap for 2019–2020 under the CARES Act to give relief during the pandemic.) If interest expense exceeds this 30%-of-income threshold, the excess can’t be deducted currently.

• Excess Business Interest Expense (EBIE): Any disallowed interest gets labeled “excess business interest expense.” Corporations carry this forward themselves. Partnerships handle it differently (as we’ll see), passing it to partners.

• Carryforward: Disallowed interest doesn’t vanish; it carries forward indefinitely. However, you can only deduct it in a future year to the extent the limitation allows (e.g. if you have spare capacity under the 30% limit in that year). Tracking these carryforwards is a key function of Form 8990.

• Exemptions: A small business taxpayer is generally exempt from the §163(j) limitation. A “small” business here means having average annual gross receipts of $25 million or less (for the initial TCJA years, indexed for inflation — about $29 million for 2023, $30 million for 2024). If you qualify as a small business and you don’t have any excess interest from a partnership, you don’t need to file Form 8990 at all.

• Additionally, certain businesses can elect out of the limitation (for example, electing real property trades or businesses and farming businesses can choose to be excepted, at the cost of using slower depreciation methods).

Form 8990 is not just a bureaucratic formality; it directly ties into how much tax a business or investor will pay. If it’s required and you omit it, you could be deducting too much interest (underpaying tax) or you might lose track of your carried-forward interest deductions for future years.

Conversely, if you’re exempt but mistakenly file it or limit yourself, you might under-claim deductions. In short, accuracy matters, and that’s why the IRS expects the form to be included whenever applicable.

TurboTax vs. Form 8990: Current Support and Limitations

Given the complexity of Form 8990, it’s perhaps not surprising that consumer tax software like TurboTax has struggled with supporting it. TurboTax’s target market is individual taxpayers and small business owners with relatively straightforward returns.

Form 8990 tends to appear in more complex situations (often involving partnerships or large loan balances). Here’s how TurboTax handles (or doesn’t handle) Form 8990 across its product lineup:

TurboTax Online and Desktop (1040 Individual Versions)

All the personal TurboTax editions – Basic, Deluxe, Premier, Self-Employed (online) and their Desktop equivalents (including Home & Business for individuals) – do not include Form 8990 in their library of supported forms.

If you are doing a personal 1040 return and need to include Form 8990, TurboTax simply has no built-in capability to generate or e-file that form. This has been confirmed by TurboTax’s own support forums and frustrated users over the past several tax seasons.

What happens in practice is that if you have something on your return that indicates Form 8990 is required, TurboTax will throw an error or warning. For instance, many users first discover this when they try to enter a Schedule K-1 from a partnership and there’s an entry in Box 13 code K, “Excess business interest expense.” TurboTax might allow you to input the K-1 data, but when running the final review or attempting to e-file, it will alert you that Form 8990 is needed (and not available).

Essentially, TurboTax hits a wall: it cannot proceed with an e-file or complete the calculation because the form isn’t present. It also does not provide an option to attach a PDF of a manually prepared Form 8990 to the e-file. (IRS e-filing rules do allow certain PDF attachments in professional software, but TurboTax’s consumer product doesn’t let users attach arbitrary forms like this.)

The limitation applies both to TurboTax Online and Desktop for individual returns. In the Desktop software, sometimes advanced users can go into “Forms mode” and see a list of forms – Form 8990 will not be listed because Intuit simply didn’t program it for personal returns. TurboTax’s form coverage lists publicly show that Form 8990 is excluded from individual products.

Therefore, if you’re preparing a 1040 and the IRS would expect a Form 8990, TurboTax’s answer is effectively “we don’t support that.” The only solution within TurboTax is to mark yourself as exempt (if that’s legitimate) or remove the input triggering it – neither of which is a real solution if you truly need to file the form.

It’s important to note that TurboTax not supporting Form 8990 is not unique – other consumer-level tax programs like H&R Block’s software or FreeTaxUSA have had similar gaps.

The complexity and relatively low frequency of Form 8990 for individual filers probably led these companies to omit it. However, with the rise in popularity of publicly traded partnerships and the broad reach of §163(j), more individual investors are bumping into this limitation, making the lack of support a growing pain point.

TurboTax Business (Partnerships, S-Corps, C-Corps, Estates/Trusts)

Intuit also offers a separate product called TurboTax Business (Windows desktop software) that is used for entity returns: Form 1065 (Partnerships), Form 1120 (C-Corporations), Form 1120S (S-Corporations), and Form 1041 (Trusts & Estates). This is distinct from the personal TurboTax versions – it’s actually a different software package aimed at people filing returns for businesses (often small businesses, since large ones usually have CPAs).

TurboTax Business does include support for Form 8990 on business returns. For example, if you’re using TurboTax Business to prepare a partnership return (Form 1065) and that partnership is subject to the interest limitation, the software can generate Form 8990 for the partnership and include it with the return.

Similarly, a C-Corp return via TurboTax Business will handle Form 8990 if needed. This makes sense, as any moderately sized partnership or corporation with high interest expenses might need to file the form, and Intuit wouldn’t want its business software to be unable to file a complete return.

However, TurboTax Business is not a solution for individual 1040 filers in the normal sense. You can’t use TurboTax Business to file your personal tax return; it doesn’t handle the 1040 or associated schedules for individual income, deductions, credits, etc. It strictly handles entity returns. So an individual taxpayer who just needs Form 8990 (due to a K-1 or sole proprietorship) can’t simply switch to TurboTax Business for their whole return.

There is a bit of a loophole or “hack” that some savvy users have employed: If they happen to have TurboTax Business (say they also run a business on the side), they can create a dummy partnership return within that software solely to utilize the Form 8990 there.

For instance, one could start a fake Form 1065 in TurboTax Business, input the necessary numbers to mimic the interest limitation scenario, and generate a Form 8990 output. They’d then print that form and include it with their personal return filing. This is obviously an advanced and clunky workaround and not an officially supported method.

It requires careful handling to ensure the numbers on the dummy 1065’s Form 8990 match the individual’s scenario (for example, carrying over a K-1’s excess interest into the form properly). Unless you already own TurboTax Business for other reasons, it’s not cost-effective to buy a ~$170 software just to fill out one form.

TurboTax Live or Full Service Options

TurboTax has premium offerings where you can get a CPA or Enrolled Agent assist you (TurboTax Live) or even have them prepare the return for you (TurboTax Full Service). It’s important to understand that even in these services, the experts are generally using the same TurboTax interface and forms library that the consumer software allows.

So if the form isn’t in TurboTax’s system, the live expert can’t magically e-file it for you through TurboTax’s platform. What they might do, however, is guide you through the alternative: they may advise you to print and mail the return with a manually prepared Form 8990.

In Full Service, they might prepare the rest of your return in TurboTax, then provide you the completed return and instruct you to attach the manually-filled Form 8990 before mailing.

In other words, paying for TurboTax Live help does not add Form 8990 to the software. It just gives you professional advice on how to handle the situation. In some cases, the TurboTax expert might even suggest that you’d be better off using a professional tax preparer with the proper software if your situation is complex. This is a bit ironic, but it underscores that TurboTax’s ecosystem for individuals simply isn’t built for certain high-end business tax calculations.

Why TurboTax Doesn’t Support It (Context)

It might be useful to understand why TurboTax hasn’t implemented Form 8990 in the individual product, given user demand. The reasons likely include complexity and target audience:

• The calculations for §163(j) can be complicated, especially for partnerships. It involves carrying data across years and among partners (allocation of excess interest, excess taxable income, etc.). Implementing this correctly in software is non-trivial.

• The form was new starting tax year 2018, and maybe initially Intuit assumed most individual filers wouldn’t need it (because of the small business exemption). Many who ended up needing it were those with partnership investments (like in energy or real estate partnerships), which might not have been on Intuit’s radar for typical TurboTax users.

• Perhaps Intuit also wants to encourage those with complex needs to upgrade to professional help or their higher-end products. TurboTax is designed to be user-friendly; adding a form that would confuse many users (if they don’t need it) could generate more support calls or dissatisfaction.

• Still, it’s become enough of a pain point that it’s frequently discussed in tax forums. The absence of support has not gone unnoticed, and each year some wonder if TurboTax will finally include it. As of the latest tax year (2024 filing season for 2023 taxes), the answer remains no for individuals.

State tax implications: Since we’re discussing TurboTax’s support, it’s worth noting how state tax returns factor in. States vary in their conformity to the federal §163(j) limitation. Some states (like California for example in earlier years) decoupled from this rule, meaning they allow the full interest deduction at the state level even if federal limited it. Other states conform to the federal limitation. TurboTax’s state software generally follows whatever the federal starting point is and then applies state adjustments. If TurboTax isn’t handling Form 8990 federally, it also isn’t going to automatically handle any state adjustments related to it. In practice, if you have to manually do Form 8990 for federal, you may also need to manually adjust your state return. For instance, if your state does not impose the interest limitation, you’d add back the disallowed interest to state taxable income — TurboTax might not prompt you for this nuance since it didn’t know about the disallowed interest in the first place. This is another layer where professional guidance might be needed to ensure the state return is correct.

Common Scenarios When Form 8990 is Required

Who actually needs to worry about Form 8990? As mentioned, it’s not common for the average W-2 employee or small freelancer. Here are the top real-world scenarios that trigger a Form 8990 requirement, which might catch a TurboTax user by surprise:

Of course, there are other scenarios too:

• A medium-sized business owner who files an S-corporation return might find that in a high-debt year, their S-corp had to limit interest. The S-corp itself (if using TurboTax Business) would carry it forward, but if that owner also does personal taxes on TurboTax, they might have to reconcile that information.

• A corporate taxpayer (C-corp) usually wouldn’t be using TurboTax personal at all, but if they did their own C-corp return on TurboTax Business and then also do personal, they’d have separate processes anyway. The corporate return’s Form 8990 would not flow to a personal return except via dividends perhaps indirectly.

• Also, consider multiple businesses under common control. If you have several entities, each under the small-business threshold, you might think you’re exempt. But tax law has aggregation rules: if businesses are under common ownership, you may have to aggregate their gross receipts to determine if the $25 million threshold is met. So an entrepreneur with three $10-million revenue companies could be subject to the limit when viewed collectively. Form 8990 would then apply on each entity’s return. TurboTax Business might help for each entity, but if you tried to do any of that on a personal schedule C or similar in TurboTax personal, you’d be out of luck.

The key takeaway: Form 8990 mostly lurks in partnership and corporate settings. If you’re an individual who only owns small businesses or has modest rental activities, you probably won’t see it. But if you dabble in partnerships (even as a minor investor) or have a thriving business with large loans, the form can become an unwelcome requirement.

Workarounds for TurboTax Users: How to File Form 8990 Regardless

If you find yourself needing Form 8990 but stuck with TurboTax, don’t panic. It’s still possible to file your taxes accurately; it just takes some extra steps. Below are the common workarounds:

1. Prepare Form 8990 Manually and Mail Your Return: This is the most straightforward solution. Complete as much of your tax return as you can in TurboTax, but do not e-file it.

Instead, when you’re ready to finish, print out the return (TurboTax will include all other forms except 8990). Obtain a blank Form 8990 from the IRS website (it’s a fillable PDF or you can print and fill by hand). Fill out the form manually with the required information:

• If your need for 8990 comes from a partnership K-1, use the data from the K-1 footnotes to complete the form. Often the partnership will provide a statement of your share of Adjusted Taxable Income, interest expense, etc., or at least the amount of excess interest expense allocated to you. For a simple case, you might just enter the excess interest on the line that carries it to next year.

• If you have your own business interest to calculate, you’ll need to compute your ATI and the 30% limit, etc., which the form guides you through. Use the figures from your TurboTax-generated income statements to assist.

• The form has a Part I for general calculation, and potentially a Part II/III if you’re a partnership or have partnership carryforwards. Fill only the parts relevant to your situation (for many individual filers with a K-1, it might just be Part I and the line in Part II where you report the disallowed amount to carry forward).

• Attach the completed Form 8990 to your printed TurboTax return. Make sure to include any statement from the K-1 that might be required (some K-1s come with a footnote detailing 163(j) info – include that in the mail packet as well if you have it).

• Mail the entire return to the IRS (and state, if your state requires a copy). Since you can’t e-file with TurboTax in this situation, paper filing is the way. Tip: Send it via certified mail or a trackable courier to have proof of delivery, because interest limitation cases can be sensitive if the IRS later questions something.

Yes, it feels very old-school to paper-file in the age of e-filing. But the IRS does accept paper returns with Form 8990 attached. The downside is it may take longer to process, and any refund could be delayed. However, this is currently the surest way to file a complete and compliant return when using TurboTax.

2. E-File the Main Return and Send Form 8990 Separately (Not Recommended): Some taxpayers wonder, can they just e-file everything through TurboTax except Form 8990, and then mail Form 8990 by itself to the IRS? Officially, the IRS processing pipeline doesn’t have a clear mechanism to match a separately mailed form to an e-filed return.

If you try this, it’s likely the IRS will treat that mailed Form 8990 as an attachment to nowhere, or they may send a notice saying “we received a form we couldn’t associate with a return.” Generally, the IRS expects Form 8990 to be included with the return upon filing. So while a few people have attempted to e-file and then mail in just the 8990 with a cover letter explaining the situation, it’s risky.

You might not get credit for filing it, or your e-filed return could later be flagged for missing information. Thus, the safest approach is to mail the whole return together (workaround #1). If you absolutely must e-file because of some circumstance, be prepared that you might later have to respond to an IRS notice with the form, or even file an amended return including Form 8990.

3. Use TurboTax Business (If Available) to Generate Form 8990: As noted earlier, if you happen to own TurboTax Business (and thus can access Form 8990 through that software), you can try this workaround:

• In TurboTax Business, start a new dummy return for a partnership or corporation. Enter just enough data to simulate the interest expense scenario. For example, you could create a partnership with one partner (yourself) that has the relevant interest expense and income figures.

• Go through the Step-by-Step until you reach the section on Business Interest Expense limitation. The software should prompt or automatically calculate the limitation if applicable. It will generate Form 8990 as part of the return.

• Print just the Form 8990 (and any worksheet or schedule it produces related to it). You don’t actually file this dummy return anywhere – it’s just a vehicle to get the completed form.

• Attach that form to your real tax return as filed (most likely meaning you’ll still mail the return; you could also attempt to use the numbers from it to manually input into a form as in step 1).

• This method can ensure you didn’t make a math mistake because the software did the calc for you. However, it’s quite labor intensive and requires you to fully understand what you’re inputting. Caution: Make sure the dummy return’s figures align perfectly with your actual tax situation (e.g. if the partnership would have had $X of ATI and $Y of interest, use the real numbers from your K-1 or business).

For most users, this workaround is overkill. If you already have TurboTax Business because you needed it for an actual partnership you manage, then you might utilize it. If not, it’s probably easier and cheaper to do #1 or go to a pro.

4. Switch to a Different Tax Software Mid-Stream: If you discover the Form 8990 issue early enough, one option is to abandon TurboTax for that year and use a different solution that supports the form. Unfortunately, among consumer software, TurboTax’s main competitors (H&R Block, TaxAct, etc.) have historically also lacked Form 8990 support in their interview process. However, some slightly more advanced platforms or lesser-known ones might allow it.

For example, TaxAct sometimes allows entry of a Form 8990 if you know what you’re doing (or at least they provide guidance to attach it in paper). Drake Software, which is professional but more affordable to license, could be an option for a very determined DIY user (though Drake isn’t really marketed to individuals).

Realistically, by the time you’ve entered all your info in TurboTax and hit this snag, you may not relish re-entering everything into a new program. And there’s no guarantee the new software will handle it elegantly either.

If you do consider this path, check first whether that software truly supports e-filing with Form 8990. Otherwise, you might be in the same boat.

5. Hire a Professional for a One-Time Fix: This isn’t a “within TurboTax” workaround, but it’s the path many take. If you’re uncomfortable with manually preparing forms or worried about mistakes, you can take your nearly-completed TurboTax return to a CPA or tax preparer. Some will offer to just handle the problematic part (in this case, preparing Form 8990 and ensuring your return is correct). They will likely need to import or re-enter your data into their professional software to generate a full return with Form 8990 and e-file it.

Yes, it will cost extra – but for some taxpayers the cost is worth the peace of mind and not having to mail a return. If you do this, consider it a learning: your finances might have reached a complexity where having an on-call tax professional is beneficial annually.

In summary, TurboTax users have managed to file with Form 8990 by going analog (paper filing) or leveraging other software/professional help. None of these workarounds are as simple as clicking “efile now,” but until TurboTax integrates this form (if ever), these are the ways to stay compliant.

Alternatives to TurboTax for Filing Form 8990 (Software & Services)

TurboTax is just one product in the tax prep landscape. When it comes to handling Form 8990 and other complex business forms, professional-grade software or services can fill the gap. Here are some alternatives and their relation to Form 8990:

• Intuit ProConnect Tax Online: This is Intuit’s own cloud-based professional tax software (formerly known as Intuit Tax Online). It’s essentially TurboTax’s big sibling designed for CPAs and tax firms. ProConnect supports all IRS forms, including Form 8990, by design. A tax professional using ProConnect can easily include Form 8990 and electronically file the return with it. ProConnect is not marketed to individual taxpayers, but if you’re tech-savvy and willing to pay per-return fees, theoretically an individual could use it.

• However, it lacks the friendly interview and guidance TurboTax provides; it expects the user to be familiar with tax forms. It’s more practical to engage a professional who uses ProConnect on your behalf. If you already have a TurboTax account, interestingly, ProConnect (and the other pro packages) are part of Intuit’s ecosystem – but they don’t cross over directly in data or user interface.

• Intuit Lacerte: Lacerte is another Intuit-owned software, one of the premier desktop tax software used by accounting firms. It has very robust capabilities for complex tax scenarios. Lacerte will handle Form 8990 seamlessly, whether it’s for a partnership, corporation, or individual who needs to attach one. The software does all the heavy calculations behind the scenes. Lacerte is sold as an annual license often costing thousands of dollars, which makes it impractical for a one-time individual user. But this is what many CPAs might use if you hire one. From a taxpayer perspective, knowing that products like Lacerte exist explains why consumer software might cut off complexity at a point – Intuit expects those with advanced needs to migrate to using (or paying someone who uses) Lacerte/ProConnect.

• Intuit ProSeries: Another Intuit professional line (geared a bit more towards smaller practices than Lacerte). ProSeries also supports Form 8990. The point is, all Intuit professional products include the form; it’s just the retail product that doesn’t.

• Other Professional Software: Non-Intuit examples include Thomson Reuters’ UltraTax, Wolters Kluwer CCH Axcess or ATX, Drake Software, TaxSlayer Pro, etc. Every professional tax prep software will have Form 8990 available because they cater to full-service return preparation. If you hire a tax professional, chances are they are using one of these, and you won’t have to worry about how to generate the form – they’ll do it as part of their service.

• H&R Block Tax Pro or Office: If you don’t want a high-priced CPA, even going to an H&R Block office (or their virtual Tax Pro service) can handle this. The tax pros there use H&R Block’s internal professional software, which does support Form 8990. The cost might be lower than a CPA firm, though it depends on complexity. The advantage is you get the form filed and probably e-filed, and they often guarantee accuracy.

• TaxAct and Others (DIY): As of recent years, TaxAct (a DIY competitor) at least acknowledges Form 8990 in their help files. They may allow users to fill it out manually and include it as an attachment for paper filing. Some reports suggest TaxAct still doesn’t permit e-filing it either, though. So while worth checking, don’t assume another DIY software will solve it. FreeTaxUSA is another online service; it didn’t support it either and would also require paper filing.

Given these alternatives, one strategy some taxpayers use is: do the initial work in TurboTax (because they like its interface), but when it comes to finalizing, use a professional’s help for the final mile. This could mean paying for an hour of a CPA’s time just to review and input into their system. Or, if you’re daring and have some tax knowledge, you might buy a lower-cost professional package like Drake (around $330 for a full license which includes all forms) and use it yourself. That’s a pretty extreme step for one form though.

Hiring a CPA or EA: Beyond software, hiring a CPA (Certified Public Accountant) or EA (Enrolled Agent) or other licensed tax preparer is often the most surefire way to handle Form 8990 correctly. These professionals deal with forms like 8990 regularly for their business clients. They’ll not only have the software to do it, but also the expertise to ensure every line is correct – including whether you actually need to file the form in the first place. For example, a CPA might help determine if your partnership qualifies as a small business (thus no form needed), or if you can make a late election for real property trade or business to avoid the limitation, etc. That kind of strategic advice is beyond what TurboTax can offer.

While hiring a pro costs money, it might not be exorbitant for an issue like this. If the rest of your return is straightforward, you could negotiate a fee for just handling the complex part. Some taxpayers essentially do a “self-prep hybrid,” where they prepare everything, then hand it to a CPA to check and file. Many professionals are okay with that arrangement and charge a lower fee than if they had to do data entry for your whole return from scratch.

In summary, the alternatives to TurboTax boil down to:

• Use professional software (directly or via a preparer) that supports Form 8990 and e-filing it.

• Or at minimum, use another DIY tool that might support the form better (though currently none of the big names fully integrate it for e-file, as far as known).

If Form 8990 is likely to be a recurring annual requirement for you, it’s worth considering migrating off TurboTax permanently. Sometimes tax situations evolve to a point where the convenience of TurboTax no longer outweighs its limitations. That’s a good segue into comparing doing it yourself vs getting professional help.

Pros and Cons: TurboTax DIY vs Hiring a Tax Professional

When deciding how to handle a tax situation involving Form 8990, you might weigh sticking with TurboTax (and workarounds) versus handing things over to a professional. Here’s a side-by-side look at the advantages and disadvantages of each approach:

In essence, using TurboTax by yourself is perfectly fine and cost-effective if your tax situation falls within what it can handle. The moment you step outside that (like requiring Form 8990), the “DIY” path becomes less convenient. You face extra work and potential risks (like an IRS notice if done wrong). On the other hand, using a tax professional almost guarantees that your Form 8990 and everything else will be handled correctly, at the cost of money and handing over the reins.

Some taxpayers choose a middle ground: prepare everything with TurboTax for the familiarity and to ensure nothing is missed, but don’t actually file it; then give that information to a professional to double-check and file with the needed forms. This way you still learn about your taxes and keep a degree of control, but you get the benefit of the pro for the tricky parts. It can be a bit redundant, but for complex situations it can be worth it.

If Form 8990 is the only thing tripping you up in TurboTax, you might feel it’s overkill to hire a CPA just for that. In that case, doing the manual form and mailing could be an acceptable solution. However, consider your trajectory: if you keep investing in partnerships or your business grows, you may face more forms or issues TurboTax doesn’t handle (today it’s Form 8990, tomorrow it might be Form 8886 for some tax shelter disclosure, who knows!). At some point, upgrading to professional help can pay off by avoiding mistakes or missed opportunities.

Common Mistakes and Pitfalls to Avoid with Form 8990 and TurboTax

When dealing with the Form 8990 issue, taxpayers often make a few missteps. Here are some common mistakes to avoid:

• Ignoring the Requirement: By far the biggest mistake is to simply ignore Form 8990 when it’s actually required. For example, say your K-1 shows an excess business interest expense but TurboTax doesn’t include the form – you might be tempted to shrug it off since the amount is small or TurboTax allowed you to e-file without it (in some cases TurboTax might not catch it if you entered the K-1 incorrectly). Not filing Form 8990 when you’re supposed to can be considered an incomplete return. The IRS could send a notice asking for the missing form, or in the worst case, disallow the related deduction or carryforward until it’s properly reported. Always err on the side of compliance: if the form is required, include it (even if that means paper filing).

• Attaching the Form Incorrectly: Some who realize they need Form 8990 try to attach it to TurboTax in unsupported ways. For instance, attaching it as a JPEG or PDF in the miscellaneous attachments section (TurboTax might allow certain attachment types for specific forms, but not this). As mentioned, TurboTax doesn’t support attaching a PDF for e-file here, so attempting to force it could corrupt your e-file or lead to rejection. Follow the known workaround steps instead of half-measures. Similarly, don’t mail the form to the IRS without a full copy of your return or without an explanation. An isolated Form 8990 doesn’t tell the whole story.

• Entering Data Incorrectly in TurboTax to Avoid the Form: A dangerous tactic some consider is altering the way they input data so TurboTax won’t think Form 8990 is needed. For example, if a user has a K-1 with excess interest, they might omit that box 13K entry so TurboTax stays silent. Or they might classify an activity differently (say, as investment interest on Form 4952 instead of business interest) to dodge the limitation. Doing this can mess up your taxes: you might deduct something you shouldn’t (risking penalties/interest later), or lose track of an expense you could deduct in the future. It’s effectively misreporting. Avoid “fooling” the software; it’s not worth it. Always report information in the correct fields, even if the software doesn’t handle the consequence well.

• Forgetting State Implications: If you go the manual route for federal Form 8990, remember to adjust your state return if needed. A common mistake is to mail the federal Form 8990 and then e-file the state via TurboTax without accounting for the difference. If your state doesn’t follow the interest limitation, you’d need to add back the disallowed interest to your state return income (meaning you actually get a state deduction for it). TurboTax won’t know to do that on its own, since it didn’t register the disallowed amount. Conversely, if your state does follow federal rules, they might want a copy of Form 8990 or have their own form (some states require a computation or attachment to show how you arrived at allowed interest). Check your state’s instructions or consult a pro so you don’t miscalculate your state tax.

• Not Keeping Documentation: Suppose you did the manual Form 8990 this year and had an excess interest carryforward. It’s critical to keep that form and carryforward information for next year’s taxes. TurboTax won’t have it in its data file, so you will need to manually carry that forward. One mistake is losing track of that carryforward. If next year you’re still using TurboTax and you become exempt or something changes, you might forget you have a disallowed interest from prior year that could now be deductible. Always save a copy of Form 8990 and any carryforward figures. You may need to manually input them or again file a form in future years to claim the deduction when allowed.

• Overlooking Other Options: Sometimes people assume they absolutely must file Form 8990 when they might qualify for an exclusion and could avoid it. For example, perhaps your business is actually under the gross receipts threshold but part of a partnership that didn’t realize it qualifies as a small business taxpayer. Or you have a rental activity that could elect out of §163(j) entirely as a real property trade or business. If you missed an election (like the real estate election) and regret it, the IRS has, in some cases, procedures for making a late election (Rev. Proc. 2020-22 provided some relief for late elections related to §163(j) for 2018-2019). A tax professional could help evaluate if you can retroactively avoid needing the form by making an election or grouping businesses. The mistake would be blindly filing the form (or struggling with it) when perhaps you had a route to not be subject to the limitation at all.

In short, the pitfalls are either under-reporting (skipping the form or hiding data) or mis-filing (attaching wrong, missing state steps, etc.). Both can cause headaches down the line. The good news is these are avoidable with careful attention and, if necessary, consultation with someone knowledgeable.

IRS Guidance and Future Outlook for Form 8990

The landscape for Form 8990 and the underlying Section 163(j) limitation has evolved over the past few years, and will likely continue to change. Staying informed can help taxpayers anticipate issues and perhaps hope for better software support eventually. Here are some developments and outlook points:

• IRS and Treasury Guidance: After TCJA passed, the IRS and Treasury issued regulations to flesh out the Section 163(j) rules. Final regulations (and some subsequent tweaks) clarified a lot of things like how partnerships should allocate excess interest, how to calculate ATI precisely, how the small business exemption works with affiliated groups, etc. For example, the regs confirm that for partnerships, any disallowed interest is allocated to partners as EBIE (Excess Business Interest Expense), and those partners can only deduct it in future years when that same partnership allocates them Excess Taxable Income (ETI) or Excess Business Interest Income (EBII). These are concepts that show up on Form 8990 Schedule A for partnerships. While this is fairly esoteric, the point is the rules are now well-defined. The IRS also has published FAQ documents and instructions that help taxpayers understand if they need to file the form. One helpful clarification the IRS made is that if you’re a small business but you have excess interest from a partnership, you do need to file Form 8990 to carry that forward – being small doesn’t exempt you from filing in that case. They basically closed what some thought was a loophole where small partners might ignore it; the IRS wants that form filed to track the carryforward.

• CARES Act and Temporary Changes Recap: The 2020 CARES Act, as mentioned earlier, temporarily loosened the rules (raising the 30% to 50% for 2019/2020 and allowing using 2019’s income for 2020 calculation, plus special partnership rules). Those changes are now in the rear-view; 2021 and beyond we’re back to 30% and with the tighter definition of ATI post-2021 (no depreciation add-back). The expiration of the depreciation add-back from 2022 onward means many businesses that were comfortably under the limit might suddenly find themselves limited. More Form 8990 filings may be required as a result from 2022 forward. For instance, a manufacturing company that had a lot of depreciation write-offs might not have hit the cap when ATI was EBITDA; but now using EBIT, their ATI is smaller and interest that was fully deductible before might now overrun 30%. Thus, tax year 2022 saw a jump in cases where Form 8990 applied, and 2023 likely continues that trend. It’s something to be mindful of if you hadn’t needed the form in 2018-2021 and suddenly do in 2022 or later.

• State Conformity Changes: Some states that initially decoupled from §163(j) have revisited that stance, and vice versa. For example, Connecticut introduced its own interest add-back for corporations as part of a broader tax scheme, and other states provided their own modifications. The reason this matters: if states uniformly required something similar, software like TurboTax might have more incentive to handle it to complete state returns. But since state treatments vary, they may continue leaving it to professionals. If you file in a state that now conforms to 163(j) when it didn’t before, keep an eye out for new state forms or lines on state returns regarding the interest add-back or subtraction.

• Legislative Outlook: There have been discussions in the business community and Congress about modifying the interest limitation. One proposal floated is to revert to an EBITDA basis for ATI permanently (to make the limitation less harsh) or to increase the percentage or threshold for small businesses. Another angle is that, as part of any future tax legislation (especially if parts of TCJA are revisited around their sunset in 2025 for individual provisions), the interest limit might be reconsidered. If changes happen, new IRS forms or rules could come into play. For example, if the threshold for “small business” was raised significantly, perhaps many more would be exempt from needing Form 8990. However, any significant change would likely only be for future tax years. As of now (2025 filing season), the 30% limit and around $30 million small-biz threshold are the status quo.

• TurboTax Possible Updates: Will TurboTax eventually include Form 8990 in its individual software? Intuit hasn’t given any public indication that it will. Each year they publish a list of forms supported, and each year since 2018 Form 8990 has been conspicuously absent for 1040s. Perhaps if the volume of affected users grows and competitors start to offer it, Intuit might change course. TurboTax does add forms occasionally as demand dictates (for instance, if a new credit or deduction becomes common). The barrier here is complexity and user base size. If tens of thousands of TurboTax users complain or drop the product due to this issue, Intuit might respond. In the meantime, unfortunately, it’s a gap that likely persists.

• E-Filing and Attachments: The IRS in general is pushing for more e-filing of all returns and has gradually allowed electronic filing for almost all forms (including complex ones). The current limitation is not with the IRS accepting Form 8990 – they do, in professional transmissions. It’s with TurboTax’s platform. TurboTax doesn’t let users attach PDFs except in very limited scenarios (like attaching a PDF for a state-specific form or certain statements, but not arbitrary forms like 8990). If in the future the IRS mandated e-filing for certain returns (e.g. partnerships beyond a certain number of partners must e-file, which is actually already a requirement now), then ensuring all necessary attachments can be included becomes critical. In fact, starting in 2024, partnerships with 10+ partners are required to e-file their 1065 – TurboTax Business presumably handles that, including Form 8990 if needed. So Intuit is capable of doing it on the business side. Perhaps they assume any individual needing it can just mail. But if IRS ever required 100% e-filing for individuals (not likely soon, especially with these edge forms), TurboTax would have to adapt or lose those customers.

In summary, expect Form 8990 to remain a fixture for businesses with debt. The rules limiting interest deductions don’t seem to be going away; if anything, more taxpayers may feel its effects as time goes on. Keeping up with IRS instructions each year is wise (they sometimes update the Form 8990 instructions annually for inflation thresholds or clarifications). And keep an eye on TurboTax’s updates – but plan as if you’ll need a workaround unless you hear explicitly that they’ve added support for it.

FAQ: TurboTax and Form 8990

Q: Which versions of TurboTax support Form 8990?
A: None of the personal 1040-filing versions of TurboTax (Free, Deluxe, Premier, Self-Employed, or Home & Business) support Form 8990 at this time. The only TurboTax product that includes Form 8990 is TurboTax Business, which is for preparing business entity returns (partnerships, corporations, etc.), not individual returns. Even TurboTax Live’s experts can’t add the form to the consumer software. So if you’re filing an individual tax return, TurboTax won’t handle Form 8990 for you directly.

Q: I have a K-1 with code 13K (Excess Business Interest Expense). Do I need to file Form 8990?
A: Most likely yes. A K-1 line 13 with code K indicates your partnership had interest expense disallowed by the 163(j) limitation and allocated a portion to you. The general rule is that you must file Form 8990 with your tax return to report this excess interest, even if you personally are below the income thresholds. The form will show that you have an interest expense carryforward (which you might deduct in a future year if conditions allow). The only time you wouldn’t is if that K-1 also indicates you’re an exempt partner (which is uncommon – usually all partners have to track it). So plan on including Form 8990. If you’re using TurboTax, this means preparing and attaching it manually as discussed above.

Q: Can I still e-file my return with TurboTax if Form 8990 is required?
A: Unfortunately, no. TurboTax will not let you e-file a return that requires Form 8990 because the form isn’t available in the program. When the review detects the need for it (or if you know you need it but TurboTax doesn’t detect it), the only correct course is to switch to a paper file or switch to a professional preparer who can e-file it. TurboTax doesn’t accept PDF attachments for this form either. So if 8990 is needed, you’re effectively barred from e-filing through TurboTax. The safest approach is to print and mail the whole return with the form included. It’s a bit of a hassle, but it’s the current workaround.

Q: What is the gross receipts threshold for needing Form 8990 (small business exemption)?
A: The tax law says that a “small business taxpayer” is exempt from the Section 163(j) interest limitation, meaning they wouldn’t need to file Form 8990 for their own interest. To be a small business taxpayer, your average annual gross receipts must be $25 million or less for the past three years (for years after 2018, this base number is indexed for inflation: e.g., ~$26 million, $27 million, and so on; for 2023 returns it’s around $29 million, for 2024 returns $30 million). Also, you must not be classified as a tax shelter. If you meet that test and you don’t have any interest from a partnership that was limited, then you wouldn’t file Form 8990.

Importantly, if you are under the threshold but have a K-1 with excess interest, the IRS still expects Form 8990 because the partnership itself wasn’t small (or chose not to be treated as small). So the small business exemption mostly spares owners of small pass-through businesses from needing to deal with 163(j) on their own activity. TurboTax essentially assumes most of its users fall in this small category (which is why the form isn’t integrated). But as soon as something like a K-1 brings in big-business issues, the form comes into play.

Q: Do I need Form 8990 for my rental property’s mortgage interest?
A: If you own rental real estate as an individual (reported on Schedule E), typically you will not need Form 8990, because most rental activities for individuals are below the threshold or can elect out. Rental income is usually considered a trade or business for 163(j) if it’s done for profit and not as a passive holding, but many landlords qualify as “small” under the gross receipts test. Also, there’s a special election: an electing real property trade or business can opt out of the 163(j) limits entirely (in exchange, you use a slower depreciation method for buildings). Many real estate folks make this election specifically to avoid filing Form 8990 and to ensure all their interest remains deductible.

If you have just a couple of rental houses or a duplex, you almost certainly are under the $25M receipts level, so you’re exempt by default. No Form 8990 needed. If you’re a bigger landlord (say you have a large portfolio or own commercial buildings with lots of income and interest expense), talk to a tax advisor about the real property trade or business election to avoid 163(j). If you don’t elect out and you do have high interest relative to income, you might need to file Form 8990 to show the limitation. But again, that’s rare for an individual investor — it usually hits partnerships or corporations investing in real estate.

Q: How does Form 8990 differ from Form 4952 (Investment Interest) or other interest forms?
A: This is a great question because it’s easy to confuse different interest deduction limitations. Form 4952 is used to figure out the deductible amount of investment interest expense (interest on loans used to buy investments like stocks, if not part of a business). That limitation is tied to your net investment income and is a totally separate rule from Section 163(j). TurboTax does support Form 4952, as many individuals have investment interest (for example, margin interest from a brokerage account) that needs to be limited.

Form 8990, on the other hand, deals with business interest expense for a trade or business under Section 163(j). Think of it this way: if you took a loan in your personal name to buy stocks, that’s investment interest (Form 4952 applies). If you took a loan to fund your business or rental activity, that’s business interest (Form 8990 might apply if you’re big enough). The rules, thresholds, and carryforward mechanisms differ. Also, importantly, investment interest (4952) is handled at the individual level only, whereas business interest (8990) can be at an entity level and then passed to individual via K-1.

There are also other forms or schedules for interest: e.g., Schedule A (for personal mortgage interest and such), but those are unrelated to 163(j). For depreciation and other business deductions, you might use Form 4562 for example, which TurboTax does handle. It’s somewhat ironic – TurboTax can help you limit your depreciation (via elections on Form 4562) but not limit interest via Form 8990; the latter is just more complex to integrate.

In summary, don’t confuse Form 8990 with Form 4952. If you have both large business interest and large investment interest, you could conceivably need both forms in one return – a scenario reserved for quite sophisticated taxpayers, and a situation where TurboTax definitely may not be the ideal tool.

Q: What happens if I don’t file Form 8990 when required?
A: Failing to include a required Form 8990 is akin to submitting an incomplete tax return. The IRS processing might accept your return initially (especially if e-filed, since TurboTax wouldn’t have flagged an error if you suppressed the issue), but later the IRS could realize the omission. They might send you a letter (a notice) asking for the missing form or for clarification. If on that form it turns out you should have disallowed some interest, the IRS could recalculate your tax and send you a bill for the difference plus possible penalties and interest for the underpayment.

Another consequence is on your carryforwards: if you had disallowed interest that should carry forward, not filing the form means there’s no official record of it. This could create confusion in future years about what you’re entitled to deduct. While the IRS likely has the partnership K-1 info indicating you had excess interest, you want everything documented on your return as required to avoid issues. Essentially, not filing might kick the can down the road, but it could make untangling things harder later (especially if you switch preparers or software – the new one might not know you have a carryforward unless you kept track). It’s always best to file the forms that are required. If you realize you missed it for a prior year, you can file an amended return (Form 1040-X) to include Form 8990 and set the record straight.

Q: Is TurboTax going to add Form 8990 support in the future?
A: As of the latest information, TurboTax has not announced any intention to add Form 8990 to its individual tax software. Each year’s forms supported list has excluded it, and representatives have indicated that currently there’s no development on that. It’s possible if enough customers voice feedback or if the form becomes more mainstream that Intuit might reconsider. But given it’s been several years without support, you shouldn’t count on it for the upcoming tax season. If it does ever get added, it would likely be highlighted in TurboTax’s product updates, since it would be a big deal for those affected. Keep an eye on TurboTax’s community forums or product announcements around December/January of a tax season to see if new forms are included. Until then, if you anticipate needing Form 8990, plan ahead using the workarounds or alternatives we’ve discussed.

Q: I’m considering just not investing in partnerships anymore to avoid this hassle. Is that reasonable?
A: This is more of a financial decision than a pure tax question, but it’s worth addressing. Some taxpayers were caught off-guard by Form 8990 because they invested in something like a Master Limited Partnership (MLP) or other tax-advantaged entity without realizing the extra compliance burden. If the administrative hassle (or paying a CPA) outweighs the benefits of that investment to you, it’s reasonable to reconsider such investments. For example, many small investors prefer REITs or C-corporation stocks over MLPs specifically because they issue 1099s instead of K-1s, making taxes simpler.

However, don’t let the tax tail wag the dog too much. If an investment is fundamentally sound and fits your portfolio, a bit of extra tax paperwork is usually not a reason to avoid it altogether. You can manage the tax complexity by adjusting how you file (perhaps using a professional or the right tools) rather than giving up the investment. On the flip side, if you were on the fence about that investment anyway, the tax headache could be the tipping point to choose a simpler alternative. It really depends on your personal tolerance and cost/benefit analysis. Just make sure you’re deciding with full info: now that you know what Form 8990 entails, you can factor that into your choices.

Q: Are there any known court cases involving Form 8990 or Section 163(j) that I should be aware of?
A: Since Section 163(j) in its current form has only been around since 2018, there haven’t been major court cases specifically litigating this yet (at least not high-profile ones). Most of the action has been in regulations and IRS guidance rather than the courts. There have been some tax court cases historically on what is a “trade or business” vs. “investment” (important because 163(j) applies to business interest but not investment interest). Those cases could indirectly affect 163(j) determinations. Also, there was a lot of commentary from organizations (like the AICPA, big law and accounting firms) during the regulation-writing process – some of their concerns were addressed in the final rules.