IRS Releases Guidance on New Bank Loan Interest Deduction
OBBBA Introduced new Section 139L and IRS releases guidance
The One Big Beautiful Bill Act introduced new Code Section 139L. This Code allows banks, insurance companies, and other related financial institutions to deduct 25% of the interest income received on certain rural and Agricultural real property loans.
The IRS just released Notice 2025-71 providing additional guidance on the deduction.
A qualified real estate loan is any loan that is secured by rural or agricultural real estate that is substantially used for the production of ag products. It also applies to fishing and seafood processing and aquaculture facilities.
A qualified lender will exclude 25% of the interest income received on this real estate loan. However, the lender will also be required to exclude 25% of the interest expense paid to service this loan.
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