Sponsors (4)
The bill increases interest deductibility to lower taxes for leveraged businesses and other interest-heavy taxpayers, but does so at the cost of reduced federal revenue and a likely competitive tilt toward highly-leveraged firms.
Businesses (especially pass-throughs and corporations) and other taxpayers with interest-heavy operations will be able to deduct more business interest for tax years beginning after Dec 31, 2025, lowering their taxable income and reducing effective federal tax bills.
All taxpayers may face higher federal deficits or pressure for future tax increases or spending cuts because broader interest deductions will reduce federal tax receipts.
Less-leveraged small businesses and competitors could be disadvantaged because the change favors capital-intensive or highly-leveraged firms that gain more from increased interest deductibility.
Based on analysis of 2 sections of legislative text.
Revises the "adjusted taxable income" definition used to limit business interest deductions by inserting new text and removing a prior clause, effective for post-2025 tax years.
Introduced March 26, 2026 by Shelley Moore Capito · Last progress March 26, 2026
Amends the Internal Revenue Code definition of “adjusted taxable income” used to calculate the business interest limitation by adding new text to one clause and removing another clause that a prior law had inserted. The change reverses a prior modification and alters how business interest deductibility is computed for affected taxpayers. The amendment applies to taxable years beginning after December 31, 2025. The bill does not create new programs, appropriate funds, or impose administrative duties outside the tax code change.