New EBITDA Act Restores Business Interest Deductions: Tax Calculation Shift Set for 2026

The Ensuring Better Interest Treatment and Deductibility Act (EBITDA) is a targeted strike on the tax code that changes how businesses calculate their interest expense deductions. Starting after December 31, 2025, the bill repeals a specific restriction in Section 163(j) of the Internal Revenue Code. By removing this clause, the bill essentially changes the math for 'adjusted taxable income,' allowing companies to potentially shield more of their earnings from taxes by deducting a larger portion of the interest they pay on loans and debt.

The Math Behind the Money

To understand this, think of a local manufacturing company that took out a massive loan to upgrade its machinery. Under current rules scheduled for the future, the government would have required a stricter calculation of their income, which often limits how much of that loan interest they can subtract from their tax bill. This bill reverts that calculation to a more generous standard. For a business owner, this means lower taxable income and more cash on hand; for the rest of us, it means the federal government might see a dip in tax revenue from the corporate sector.

Why the Timing Matters

This isn't an overnight change. Because the bill specifically targets tax years beginning after 2025, companies have a runway to plan their financing and capital investments. It’s a move that particularly favors industries that run on high debt—like construction firms building new housing developments or tech startups scaling their infrastructure. While it looks like a dry technicality, the shift effectively makes it cheaper for big businesses to borrow money by ensuring Uncle Sam doesn't cap their interest deductions as strictly as previously planned.