A business interest deduction is a tax provision allowing businesses to deduct interest paid or accrued on debt related to their operations, such as loans for equipment, vehicles, or business expansion.
LIMITATIONS
The Tax Code limits corporations’ business interest expensing to any business interest income plus 30% of the business’s adjusted taxable income (ATI). Generally, this limit doesn’t apply to companies with average annual gross receipts for the prior three taxable years below a certain threshold ($32 million for 2026). The One Big Beautiful Bill Act (OBBBA) reinstates a more favorable business interest expense deduction by allowing businesses to add back depreciation, depletion, and amortization to their ATI calculation, thereby increasing the amount of deductible interest. The change was effective starting in 2025.