Richey May’s Inside the One Big Beautiful Bill Act video series is designed to help mortgage lenders and other industry-affiliated businesses understand what this sweeping legislation means in practice, not just in theory. Hosted by Kenny Burch, Director, Mortgage Banking Tax, the series features focused conversations with experts from Richey May’s Mortgage Banking Tax team, each examining a specific provision of the Act and its implications.
In this episode, Kenny is joined by Sarah Seefeldt, Senior Tax Manager, to discuss changes to the business interest limitation under Section 163(j). While many mortgage lenders may not regularly encounter this limitation, updates under the One Big Beautiful Bill Act alter how the calculation is performed, making it an important provision to understand, particularly for lenders with more complex capital structures or nontraditional interest expense profiles.
Key Takeaways from the Episode
- The business interest limitation still caps deductions. Section 163(j) continues to limit deductible business interest expense based on a taxpayer’s income profile, requiring annual calculation even when no limitation applies.
- The calculation is now more favorable. The One Big Beautiful Bill Act permanently restores a more generous income measure when determining the limitation, allowing certain add-backs that can increase deductible interest.
- Disallowed interest isn’t lost. Any interest expense limited in the current year carries forward indefinitely, creating a timing difference rather than a permanent disallowance.
- Entity type affects how carryforwards are tracked. While the calculation itself is consistent, where disallowed interest is retained and who tracks it depends on whether the entity is a corporation or partnership.
- Most mortgage lenders won’t trigger the limit, but still must comply. Even when interest income is sufficient to avoid a deduction cap, lenders are required to calculate and report the limitation annually, with certain lending structures increasing the likelihood it applies.
Taken together, these changes make §163(j) less restrictive for many taxpayers, while reinforcing the need for consistent compliance and awareness of how financing decisions can affect deductibility.
Watch the full episode below to hear Kenny and Sarah discuss how the business interest limitation works under the One Big Beautiful Bill Act and when it may become relevant for mortgage taxpayers.
Continue the Conversation
This episode is part of the Inside the One Big Beautiful Bill Act series, which explores additional provisions shaping the mortgage banking tax landscape. Visit the series page to watch other episodes and stay current as new guidance continues to emerge.
If you have questions about how the business interest limitation or any aspect of the One Big Beautiful Bill Act may impact your organization, the Richey May Mortgage Banking Tax team is available to help.
