Tax Planning
Planning with OBBBA: How New Interest Deduction Elections Can Save Your Business
Revenue Procedure 2026-17 offers flexibility in business interest limitation elections under the One Big Beautiful Bill Act — here’s how businesses can leverage it.
By NomadicTax Research Team • 5-8 min read • April 8, 2026
## What’s New under Revenue Procedure 2026-17
In March 2026, the IRS released **Revenue Procedure 2026-17**, which introduces changes to how businesses can make or revoke interest‐limitation elections under section 163(j)(7), following the passage of the **One Big Beautiful Bill Act (OBBBA)**. This affects “electing real property trade or business,” “electing farming business,” and “excepted regulated utility trade or business” taxpayers.([eversheds-sutherland.com](https://www.eversheds-sutherland.com/en/czech-republic/insights/new-revenue-procedure-offers-flexibility-for-business-interest-limitation-elections?utm_source=openai))
## Key Details & Actionable Insights
- These elections allow businesses to largely *ignore* the interest limitation in exchange for using the Alternative Depreciation System (ADS), which **forgoes bonus depreciation** and requires slower depreciation on certain property.([eversheds-sutherland.com](https://www.eversheds-sutherland.com/en/czech-republic/insights/new-revenue-procedure-offers-flexibility-for-business-interest-limitation-elections?utm_source=openai))
- Under the new procedure, the **60-month restriction** on changing election status (making or revoking) is relaxed for designated U.S. persons whose election status has been impacted by OBBBA.([eversheds-sutherland.com](https://www.eversheds-sutherland.com/en/czech-republic/insights/new-revenue-procedure-offers-flexibility-for-business-interest-limitation-elections?utm_source=openai))
## Who Should Evaluate These Elections
- Commercial real estate owners who heavily finance their properties and would benefit from taking more depreciation by matching interests and depreciation schedules.
- Farming operations with high interest expense and slower asset turnover.
- Utilities or businesses with regulated utility components that may qualify under the “excepted regulated utility trade or business” category.
## Example Scenarios
| Business Type | Without Election | With 163(j)(7) Election | Implication |
|---------------|------------------|--------------------------|-------------|
| Real Property-heavy developer | Interest deduction limited by general 30% of adjusted income; bonus depreciation available on new property | Interest limitation ignored; must use ADS, which slows depreciation; gives full interest deductions earlier | Elect if interest expense is high relative to depreciation; prefer election even with slower depreciation in early years |
| Farming business acquiring expensive equipment | Interest deduction limited otherwise; bonus depreciation allows expensing | ADS forces longer write-offs, reducing benefit of bonus depreciation | Only elect if interest expenses dominate capital expenditures |
## Action Steps
1. Calculate your projected interest expense vs depreciation under both ADS and bonus schedules for 2025-2027.
2. Assess whether the loss of bonus depreciation in early years is offset by full interest deductions.
3. If beneficial, make the 163(j)(7) election in your timely tax return; track the carryover and changes allowed under the relaxed revocation rule.
4. Consult with your CPA for asset classification, timing of elections, and software settings.
## Caveats & Where to Be Careful
- Making the election means **foregoing bonus depreciation** on eligible property — very costly when you purchase high-cost equipment.
- Must use the ADS for property where it applies, which slows deductions over longer recovery periods.
- Phase-outs and income thresholds may still affect net benefit.
By understanding how Revenue Procedure 2026-17 interfaces with OBBBA, business owners can make more informed decisions about structuring their financing, depreciation, and overall tax strategy.