IRS Updates FAQs on the Limitation on the Deduction for Business Interest Expense and Premium Tax Credit
The IRS recently updated frequently asked questions (FAQs) regarding changes to the limitation on the deduction for business interest expense (Fact Sheet 2025-09) and the Premium Tax Credit (Fact Sheet 2025-10) under the One Big Beautiful Bill (OBBB).
For tax years beginning after Dec. 31, 2024, the 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 Dec. 31, 2025, the 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
Regarding the Premium Tax Credit, the OBBB removed the limitations on repayment of excess advance payments of the credit for tax years beginning after Dec. 31, 2025. The FAQs have removed the questions about certain Premium Tax Credit rules that do not apply after tax years 2020 and 2021.
For more information, see One Big Beautiful Bill Provisions on IRS.gov.