This article originally appeared in the May 2026 issue of The Tax Adviser.
The One Big Beautiful Bill Act (OBBBA) made significant changes to Section 163(j), which limits the deductibility of business interest expense. The OBBBA includes both taxpayer-favorable changes, such as the permanent restoration of depreciation and amortization addbacks to adjusted taxable income (ATI), and unfavorable revisions, such as the new ordering rule addressing the interaction of Section 163(j) and the interest capitalization provisions of the Internal Revenue Code.
Given the importance of the updated rules and their potential interplay with other provisions, understanding the nuances of amended Section 163(j) will be essential to tax planning and tax compliance for the 2025 tax year and beyond. With careful analysis and modeling, taxpayers might be able to take advantage of new opportunities to mitigate the impact of the interest expense limitation, helping their business operations remain as tax-efficient as possible under the revised rules.
BDO’s Ryan Bailey, Connie Cunningham, and Megan McLaughlin provide details in the full article in The Tax Adviser.