New Auto Loan Interest Deduction (The “One Big Beautiful Bill”)
Office Administrator - Auburn
The “One Big Beautiful Bill” introduced many new tax incentives for 2025. One of the anticipated deductions involves the purchase of a new American-made automobile. However, there are several stipulations attached to this deduction that must be followed in order to take advantage of it beginning with the 2026 filing season.
What is the No Tax on Car Loan Interest Deduction?
Effective for 2025 to 2028, buyers can deduct up to $10,000 interest paid annually on automobile loans for new vehicles that were purchased for personal use which had their final assembly in North America. Taxpayers with Modified Adjusted Gross Income (MAGI) over $100,000 ($200,000 for joint filers) do not qualify for this deduction. The automobile loan must have been originated after December 31, 2024.
How Do I Know if My Vehicle Qualifies?
The vehicle must have been purchased new and not used and must not be leased. The final assembly must have occurred in North America and this can be determined by the vehicle’s VIN or the vehicle's information label (Monroney sticker). The VIN can be checked online with the National Highway Traffic Safety Administration (NHTSA) utilizing their VIN Decoder tool to confirm the plant of manufacture. The vehicle also must have a gross weight rating of less than 14,000 pounds.
Who Qualifies for the Deduction?
Taxpayers with Modified Adjusted Gross Income of $100,000 or less and joint filers with a MAGI of $200,000 or less qualify for this interest deduction. Taxpayers above these income levels may qualify for a reduced deduction. It doesn’t matter if the taxpayer uses a standard deduction or itemizes their deductions on their tax returns.
Reporting Requirements
Lenders will provide statements to taxpayers with qualified interest each year showing the total amount of interest received during the taxable year. The vehicle’s VIN must be included on the tax return.