Max Annual Deduction: $10,000
Effective Dates: 2025 – 2028
Phase Out: Modified Adjusted Gross Income over $100,000 ($200,000 married filing joint)
The One Big Beautiful Bill Act (OBBBA) signed into law July 4th 2025 included one provision titled “No Tax on Car Loan Interest”. This provision provides up to a $10,000 deduction on qualifying interest paid towards the loan of a new vehicle purchase. This deduction is available to both itemizing and non-itemizing taxpayers. The following criteria must be met to qualify:
- Loan originated after December 31 2024
- Vehicle must be a new vehicle purchase that the original use of which starts with the taxpayer
- Vehicle must be used for personal use only
- Most vehicle types are eligible including motorcycles provided they have a gross vehicle weight rating (GVWR) of less than 14,000 pounds
- The location of final assembly must be in the United States
If you are unsure of your vehicle’s final assembly location, you can use this VIN Decoder website to look up your vehicles VIN number and determine where the vehicles manufacture plant is located.
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