Adjusted taxable income (ATI) refers to taxable income calculated by making adjustments to factor out the following:
- Items of income, gain, deduction or loss that aren’t allocable to a business,
- Any business interest income or business interest expense,
- Any net operating loss deduction,
- The deduction for up to 20% of qualified business income from a pass-through business entity,
- For tax years beginning before 2022, allowable depreciation, amortization and depletion deductions, and
- Other adjustments listed in IRS proposed regulations.
Deductions for depreciation, amortization and depletion are added back when calculating adjusted taxable income for tax years beginning before 2022. For tax years beginning in 2022 and beyond, these deductions won’t be added back, which may greatly increase the taxpayer’s adjusted taxable income amount and result in a lower interest expense limitation amount.