How Is the Limitation on the Deduction of Business Interest

question 67

Essay

How is the limitation on the deduction of business interest computed? Does it apply to all taxpayers? What happens to any business interest deduction disallowed by the limitation?

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Definitions:

Velocity of Money

The rate at which money is exchanged in an economy, often used to measure the health and vigor of economic activity.

Price Level

A calculation of the average cost of goods and services in an economy at a set point in time.

Nominal GDP

The market value of all final goods and services produced within a country in a specific time period, measured using current prices without adjusting for inflation.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of all goods and services produced within a country's borders in a specific time period, in real terms.