Addback of Interest and Rental Expenses to Related Entities

Provisions of 2007 Wisconsin Act 226 require interest and rent expenses paid, accrued, or incurred to a related party (“related entity”) to be added back to income. However, the Act allows a deduction for those expenses if certain requirements are met.

This law change applies to corporations, tax-option (S) corporations, partnerships, LLCs, individuals, fiduciaries, and insurance companies. The change is effective for taxable years beginning on or after January 1, 2008.

Attached is an article which provides:

  • A description of transactions affected by this law change
  • Requirements that must be met in order to deduct related party interest and rent expenses
  • Details and examples of what is considered a “related entity”

Note that taxpayers who wish to deduct related party interest or rent expenses must complete and submit Schedule RT with their Wisconsin income or franchise tax return. Schedule RT will be available on the Department of Revenue's website around July 31, 2008.

June 19, 2008