IRS updates business interest deduction rules

The IRS recently updated its FAQs on the Section 163(j) business interest expense deduction limit to reflect changes and clarifications under the One Big Beautiful Bill Act.

The law generally limits business interest deductions to 30% of adjusted taxable income, subject to certain exceptions, and the updated guidance addresses changes including the treatment of depreciation, amortization and depletion when calculating adjusted taxable income, an expanded definition of motor vehicles for floor plan financing, and clarification of which business interest expenses are subject to the limitation. See Fact Sheet 2026-14.

Beginning with tax years after 2025, certain controlled foreign corporation income inclusions will also be excluded from adjusted taxable income calculations, while the rules for electing excepted trade or business status remain unchanged. See Fact Sheet 2025-09.