In the second part of our outlook on the Tax Cuts and Jobs Act (TCJA), we looked at changes to corporate interest deductibility. The bill puts a 30% cap on interest deductions, which were generally fully deductible under previous rules.
That 30% applies to EBITDA (earnings before interest, tax, depreciation and amortization), the definition the House used in their initial draft of the bill. However, that structure is only in place for four years. Thereafter, the calculation will be 30% of EBIT (earnings before interest and tax), which was the definition used in the Senate’s version of the bill.
How will this deduction cap—and the various earnings definitions—affect companies? Read our full commentary on interest deductibility and other key tax changes on Harvest: Highland Expert Insights: Tax in Focus