S. 1688 — Growing America’s Small Businesses and Manufacturing Act

This section permanently extends the allowance for depreciation, amortization, or depletion in computing adjusted taxable income for purposes of the business interest expense deduction limitation under IRC §163(j) for taxable years beginning after December 31, 2024 (previously limited to taxable years beginning before January 1, 2022). (As background, §163(j) limits business interest deductions to 30% of adjusted taxable income plus floor plan financing interest; the prior temporary rule effectively computed adjusted taxable income as EBITDA, while post-2021 rules shifted to EBIT and thus imposed a tighter limitation.)

This section increases the Section 179 expensing limitation—the maximum amount of qualifying depreciable business assets (e.g., equipment and machinery) that businesses may immediately deduct rather than depreciate over time—to $2.5 million (from $1 million) and raises the phase-out threshold to $4 million (from $2.5 million). It also updates the inflation adjustment base year to 2025 (from 2018) and reference calendar year to 2024 (from 2017), retaining the prior years for the dollar amount in paragraph (5)(A). The changes apply to property placed in service in taxable years beginning after December 31, 2024.