One Big Beautiful Bill Act Automotive Loan Interest Tax Deductions FAQs
CONSULT YOUR TAX, LEGAL, OR ACCOUNTING PROFESSIONAL IF YOU HAVE QUESTIONS. THIS INFORMATION DOES NOT CONSTITUTE TAX, ACCOUNTING, OR LEGAL ADVICE.
What Is the New Vehicle Loan Interest Tax Deduction?
Under the new law, up to $10,000 per year of interest paid on auto loans for new vehicle purchases is tax-deductible provided all vehicle and customer eligibility requirements are met.
Is the tax deduction a direct rebate at time of purchase?
No. Eligible customers must claim the deduction to reduce their taxable income when they file their tax return.
What is the timing for the tax deduction?
The tax deduction is available for new vehicles financed on or after January 1, 2025 through December 31, 2028 and covers tax years 2025, 2026, 2027, and 2028. The interest must be from
new debt contracted on or after January 1, 2025.
Are there customer income caps for eligibility?
Yes. $100,000 for individuals and $200,000 for married customers filing a joint return, after which the deduction begins to phase out. Customers will have their deduction reduced (but not
below zero) by $200 for each $1,000 (or portion thereof) by which their modified adjusted gross income exceeds the relevant thresholds. For example, a married customer filing a joint return
who paid $4,000 in qualifying interest and had a modified adjusted gross income of $202,000 would be permitted to deduct $3,600 of the qualifying interest.
Is the tax dedication available for tax filers taking the standard deduction?
Yes. The tax deduction applies whether an individual itemizes deductions or takes the standard deduction.
Are deductions available for business or commercial entities?
No. Eligible purchases are limited to personal use vehicles.
Is there a maximum deduction?
Yes. The total annual deduction is capped at $10,000 in qualifying interest payments.
Which vehicles qualify for the tax deduction?
EV and ICE vehicles under 14,000lbs with final assembly in the U.S. qualify. Vehicles with VINs starting with a 1, 4, or 5 in the first digit indicate U.S. final assembly.
Do lease vehicle qualify?
No.
Do used vehicles qualify?
No.
Are Courtesy Transportation vehicles eligible when sold to retail consumers after service?
No. Courtesy Transportation vehicles are not eligible for interest tax deductions because the "original use" of the vehicle must "commence with the taxpayer."
Do refinanced loans qualify for the interest deduction?
Only indebtedness that originally qualified for the interest deduction (for example, a loan to purchase a qualifying new vehicle that was contracted on or after January 1, 2025) can be
refinanced and still qualify for the deduction, provided the refinancing does not increase the outstanding amount of the debt. Refinancings of debt originally contracted prior to January 1,
2025 do not qualify for the interest deduction.
How do customers substantiate the amount of interest paid?
Customers should keep detailed records of the amount of qualified interest paid during a given tax year. Additionally, for customers who pay $600 or more in qualified interest to their lender,
the lender will provide an annual statement on or before January 31 of the following year detailing the amount of qualified interest paid, similar to how customers may receive a statement detailing the amount of interest paid on a home mortgage.
Where to Get More Information:
For the most current information regarding the EV tax credit changes, please visit the IRS's website at IRS.gov. Please check this site regularly to stay up to date with the latest developments and compliance requirements.
For taxable years beginning after December 31, 2024, and before January 1, 2029, Section 163(h)(4) of the Internal Revenue Code of 1986, as amended, permits qualifying taxpayers to deduct interest paid or accrued during the taxable year on indebtedness incurred by the taxpayer after December 31, 2024, for the purchase of new qualifying vehicles, for personal use, with final assembly in the United States. Limitations may apply where a dealer has previously used a vehicle as a courtesy transportation vehicle. Personal eligibility to claim this deduction depends on the customer's own individual circumstances, including whether modified adjusted gross income exceeds the income thresholds contained in Section 163(h)(C)(ii). If customer qualifies, this deduction may be available irrespective of whether customer chooses to itemize deductions. Additional limitations apply, including a maximum amount of interest permitted for deduction in a given year. Customers should be directed to consult with their own tax, accounting, or legal professional or advisor to confirm eligibility for this deduction or if they have questions regarding their qualification to claim the deduction. This information does not constitute tax, accounting, or legal advice.