IRS updates FAQs on business interest limitation, premium tax credit

In separate fact sheets, the IRS on Tuesday updated FAQs regarding changes to the Sec. 163(j) limitation on the deduction for business interest expense under H.R. 1, P.L. 119–21, commonly known as the One Big Beautiful Bill Act (Fact Sheet 2025-09), and FAQs related to changes to the Sec. 36(B) premium tax credit made under the legislation (Fact Sheet 2025-10).

For tax years beginning after Dec. 31, 2024, the legislation amended Sec. 163(j) by:

• Allowing taxpayers to add back deductions for depreciation, amortization, or depletion when calculating adjusted taxable income; and
• Expanding the definition of floor plan financing interest.

For tax years beginning after Dec. 31, 2025, the legislation amended Sec. 163(j) by:

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

The OBBBA made a number of changes to the premium tax credit, including removing the limitations on repayment of excess advance payments of the credit for tax years beginning after Dec. 31, 2025. A taxpayer who reasonably and in good faith relies on the FAQs will not be subject to penalties that provide a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance causes a tax underpayment. However, because the FAQs have not been published in the Internal Revenue Bulletin, they do not have precedential effect and the IRS will not rely on or use them to resolve a case, it said.