IRS issues FAQs regarding section 163(j) limitation following amendments by OBBBA
OBBBA enacted various amendments to section 163(j) effective for tax years beginning after December 31, 2024, and December 31, 2025
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december 23, 2025
The IRS today issued frequently asked questions (FAQs) in Fact Sheet 2025-9 regarding the limitation on the deduction for business interest expense under section 163(j), following amendments to that provision enacted by Pub. L. No. 119-21 (the “One Big Beautiful Bill Act” (OBBBA)).
As explained in the related IRS release—IR-2025-126 (December 23, 2025):
- For tax years beginning after December 31, 2024, OBBBA amended section 163(j) by:
- Allowing taxpayers to add back deductions for depreciation, amortization, or depletion when calculating “adjusted taxable income” (ATI)
- 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, OBBBA 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 (CFC) income inclusion items under sections 951(a), 951A(a) and 78, and associated deductions, from the computation of ATI