Overview
Beginning in 2025, the One Big Beautiful Bill Act introduces a temporary deduction that allows taxpayers to deduct up to $10,000 in auto loan interest paid per year.
To qualify, the vehicle must:
Be new and for personal use
Be assembled in the United States
Weigh under 14,000 pounds
Leased or used vehicles, as well as those used for business or fleet programs, do not qualify.
Eligibility and Reporting Requirements
This deduction is available to all taxpayers, whether you itemize deductions or take the standard deduction.
Additional requirements include:
The loan must be secured by a lien on the vehicle.
Lenders must report interest of $600 or more using a new IRS form.
Borrowers must include the vehicle identification number (VIN) on their tax return to verify eligibility.
Income Limitations
The deduction begins to phase out once your Modified Adjusted Gross Income (MAGI) exceeds:
$100,000 for single filers
$200,000 for joint filers
Even if you don’t qualify for the full $10,000 deduction, this provision could still offer valuable savings for eligible car buyers.
Plan Ahead for Potential Savings
If you’re considering purchasing and financing a new car in the next few years, review your eligibility now. This deduction could be a useful tax planning opportunity that lowers your taxable income while helping offset borrowing costs.
For guidance on how this deduction fits into your broader financial strategy, please call us at (401) 921-2000 or contact us here.