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IRS updates frequently asked questions on changes to the Limitation on the Deduction for Business Interest Expense

IR-2025-126, Dec. 23, 2025
WASHINGTON — The Internal Revenue Service today updated frequently asked questions in Fact Sheet 2025-09 regarding changes to the limitation on the deduction for business interest expense (Section 163(j)) under the One, Big, Beautiful Bill.

For tax years beginning after December 31, 2024, OBBB amended Section 163(j) by:

Allowing taxpayers to add back deductions for depreciation, amortization, or depletion when calculating Adjusted Taxable Income.
Expanding the definition of floor plan financing interest to treat, as a motor vehicle, any trailer or camper designed to provide temporary living quarters for recreational, camping or seasonal use and designed to be towed by, or affixed to, a motor vehicle.
For tax years beginning after December 31, 2025, OBBB amended Section 163(j) by:

Clarifying that business interest expense subject to Section 163(j) includes any interest incurred and capitalized during the tax year, except for interest capitalized under Sections 263(g) and 263A(f).
Excluding a U.S. shareholder’s controlled foreign corporation income inclusion items under Sections 951(a), 951A(a) and 78, and associated deductions, from the computation of Adjusted Taxable Income.