Yes, for tax years beginning after December 31, 2024, U.S. tax law (via the One Big Beautiful Bill Act) permanently restores the interest deduction limit to 30% of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) under Section 163(j). This replaces the stricter 30% of EBIT rule (which deducted D&A) that was in place from 2022-2024.
Any interest below the 30%-of-EBITDA limit can be taken as a deduction against the business's taxable income in the year the interest payments are made, while any interest over the cap can be carried forward to a future tax year.
The TCJA significantly expanded IRC §163(j) by limiting the IRC §163 deduction for net business interest expense to 30% of any taxpayer's adjusted taxable income (ATI), with an exemption for small businesses and an option for real estate and farming businesses to elect out of the limitation.
The basic rule
In the BEPS Action 4 report, the OECD/G20 recommended that jurisdictions impose a cap on deductions for interest and amounts economically equivalent to interest, which should be set at between 10% and 30% of earnings before interest, taxation, depreciation and amortisation (EBITDA).
The EBITDA metric is a variation of operating income (EBIT) that excludes certain non-cash and non-operating expenses. These include interest (tied to capital structure), taxes (dependent on jurisdiction), and depreciation and amortization (based on historical investments and accounting methods).
The EBITDA coverage ratio is also known as the EBITDA-to-interest coverage ratio, which is a financial ratio that is used to assess a company's financial durability by determining whether it makes enough profit to pay off its interest expenses using pre-tax income. An EBITDA coverage ratio over 10 is considered good.
Earnings before the deduction of interest, taxes, depreciation, and amortization. It is a non- GAAP calculation based on data from a company's income statement used to measure a company's operating profitability.
According to Buffett, EBITDA is not reflective of a company's true financial performance due to neglecting capital expenditures (Capex) and changes in working capital, among various other issues.
Starting in 2022, interest expense was limited to 30% of taxable EBIT (Earnings Before Interest and Taxes). This change dramatically decreased the amount of deductible interest for many taxpayers subject to this provision. Any interest not deducted in the current year is carried forward to future years.
It does not consider non-operating income and non-operating expenses. So while EBIT excludes interest and taxes, operating income excludes non-operating income and expenses (like interest and taxes).
The OBBBA provision reverses that, restoring the EBITDA limitation: 30% of earnings before interest, taxes, depreciation, and amortization. In short: you now have more room to deduct interest on business loans used to finance equipment purchases and expansion.
You can typically deduct credit card interest on business purchases as a business expense. The Tax Reform Act of 1986 eliminated the deduction for personal credit card interest. The interest on a qualified student loan is typically eligible as a deduction.
A 30% EBITDA margin means a company makes a profit of $0.30 for every $1 of revenue it earns. This is considered a good EBITDA margin, indicating low operating expenses and high earnings potential.
As a result of the TCJA, and prior to 2022, businesses' interest expense deductions had been limited to 30% of earnings before interest, tax, depreciation, and amortization (EBITDA). Starting in 2022, interest deductions are limited to 30% of earnings before interest and tax (EBIT).
Although EBITDA is widely used, it is not necessarily a legitimate measure of a company's success, and is often used as an initial guideline prior to deeper analysis. Warren Buffett has famously called EBITDA “utter nonsense”.
Ever heard of the 30% rule? It's the idea that you should budget a minimum of 30% of your gross monthly income (i.e., your before-tax income) for housing costs, and it's practically a personal finance gospel. Rent calculators often use the 30% rule as a default assumption to determine how much house you can afford.
The Dutch 30 percent ruling is a tax facility that allows employers to compensate international employees for the extra costs of living abroad. Instead of these "extraterritorial costs" being taxed as regular income, up to 30% of an employee's gross salary can be paid as a tax-free allowance.
2. Section 40(a)(ia): If any amount paid or credited to a resident on which TDS was supposed to be deducted but TDS has not been deducted or TDS has been deducted but not paid to the government on or before the due date of return filing then 30% of such sum shall not be allowed as deduction.
A 2019 study by Harvard Business Review found either Vanguard, BlackRock or State Street is the largest listed owner of 88% of S&P 500 companies. There is a perception that a few select companies own a vast majority of the stock market.
1️⃣ EBITDA is not a standardized GAAP metric, which means there is wide variation in how it is calculated - There's no standardized formula for calculation which is leading companies to calculate in whichever way benefits them the most - Stock based compensation for example may be included in EBITDA by some analysts ...
The Rule of 40 combines a company's revenue growth and profitability into a straightforward calculation: the total of your growth rate and EBITDA profit margin should equal or exceed 40%. This rule helps SaaS companies balance rapid expansion and financial stability, ensuring long-term sustainability.