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Interest Deductibility After 2026: Why Financing Strategy Now Matters More Thumbnail

Interest Deductibility After 2026: Why Financing Strategy Now Matters More

Tax Planning

Debt is not just a financing tool. It is a tax variable.

Beginning in 2026, business interest expense limitations tightened. For many operating businesses and pass-through entities, deductible interest is limited to a percentage of adjusted taxable income. That change alters the economics of leverage.

For affluent business owners, this matters in three ways.

First, borrowing decisions now affect taxable income more directly. If interest is limited in the current year, excess may carry forward—but that does not eliminate timing risk.

Second, capital-intensive businesses face more structural exposure. Real estate development, manufacturing, and acquisition-driven enterprises need to coordinate financing terms with projected income.

Third, layering debt across entities—operating companies, holding companies, partnerships—can create mismatches in where income is reported and where interest sits.

The planning issue is not “avoid debt.” It is alignment.

We evaluate:

  • Whether projected income supports full deductibility
  • How financing affects pass-through owners individually
  • Whether alternative capital structures create more flexibility
  • How interest limitations interact with other deductions

When leverage is meaningful, interest deductibility becomes part of wealth architecture. Financing decisions should not be isolated from tax structure.

Written by Christi Shell, CWS®, AAMS®, BFA™, CETF®, Managing Director and Private Wealth Strategist at Shell Capital Management, LLC.

To speak with Christi about your financial situation, request a private consultation.

Shell Capital Management, LLC is a registered investment adviser. This material is for informational and educational purposes only and does not constitute investment, legal, or tax advice. Advisory services are only offered to clients or prospective clients where Shell Capital Management, LLC is properly registered or exempt from registration. Any views are as of the date published and may change. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.