OBBB Increases Business Interest Deduction

By removing depreciation, amortization and depletion deductions from the calculation of adjusted taxable income (ATI), the OBBB essentially increases the amount that businesses will be entitled to deduct with respect to business interest expenses. Pursuant to the 2017 tax reforms, taxpayers are entitled to deduct business interest expenses only to the extent of business interest income plus 30% of ATI, plus floor plan financing interest. The new law also modified the definition of "motor vehicle" for purposes of the floor plan financing interest provision to include certain trailers and campers (again, potentially increasing the value of the business interest deduction). The excess business loss limitation, which limits the business deductions that non-corporate taxpayers are entitled to, was also modified. Currently, those deductions are limited to the amount of aggregate gross income or gain attributable to trades or businesses of the taxpayer plus a threshold amount ($313,000 for 2025). The OBBB adds to that calculation any "specified loss", which is an excess business loss disallowed under Section 461(l) for tax years beginning after 2024. For more information on the business interest expense deduction, visit Tax Facts Online. Read More: Link to Q8533. Note: Q8533, 8532, 8028, 8029 are updated.