IRS Announces Major Tax Rule Changes Affecting Businesses and Consumers

The Internal Revenue Service (IRS) has introduced significant changes to federal tax regulations that will impact businesses, fuel distributors, and health insurance consumers. Announced on December 22, 2025, these updates are part of the provisions included in the recently passed One Big Beautiful Bill.

One of the key changes involves new refund rules for dyed fuel, which has been a longstanding issue for fuel operators navigating federal excise taxes. Under current regulations, diesel fuel or kerosene is taxed when it is first removed from a terminal, regardless of whether it is later designated for non-taxable use by being dyed. The new statute allows taxpayers to recover the initial tax payment when the fuel ultimately qualifies for an exemption. The IRS indicated that formal guidance on filing refund claims will be available in early 2026. Until then, taxpayers must refrain from submitting claims, even if fuel is removed after December 31, 2025. It is crucial to note that refunds will only be issued to the party that originally paid the excise tax unless Congress makes further changes.

On December 23, the IRS issued additional guidance focusing on business interest deductions, incorporating significant modifications to Section 163(j) of the tax code. Starting with tax years after December 31, 2024, businesses will again be able to include depreciation, amortization, and depletion in their Adjusted Taxable Income, easing the cap on deductible interest expenses. In 2026, the IRS will clarify that interest costs capitalized during the year generally fall under the Section 163(j) limitation, with specific exceptions. Notably, certain foreign income inclusions linked to controlled foreign corporations will be excluded from the Adjusted Taxable Income calculation.

The IRS also revised its Frequently Asked Questions (FAQs) related to the Premium Tax Credit, which assists low- and moderate-income households in affording insurance through the Health Insurance Marketplace. Changes stemming from the One Big Beautiful Bill include the removal of repayment caps on excess advance credits for tax years after December 31, 2025. The IRS has eliminated outdated guidance that referred to temporary rules which have already expired.

These updates reflect a broader transformation at the IRS aimed at simplifying complex legacy tax rules while expanding deductions and credits in specified areas. As agencies work to convert sweeping legislation into practical guidance, taxpayers are urged to be patient.

The implications of the One Big Beautiful Bill are now transitioning from statutory changes to enforceable regulations, with tangible effects expected to appear on tax returns sooner than anticipated. This adjustment highlights the IRS’s commitment to adapting tax legislation to better serve businesses and consumers alike.