Under recent federal tax law changes (H.R. 1, also known as the One Big Beautiful Bill Act), qualified buyers may be able to lower their taxable income by deducting up to $10,000 per year in interest paid on a qualifying auto loan for a new personal vehicle.
Up to $10,000 in Interest Savings
If you meet the rules, you can deduct up to $10,000 of the interest you pay on a qualifying auto loan from your federal income tax.
To be eligible, the vehicle must have its final assembly in the United States — supporting domestic auto manufacturing.
This deduction applies to interest paid during tax years 2025 through 2028 on qualifying auto loans first taken out after December 31, 2024.
To qualify for this federal tax break, all of the following must be true:
If you refinance a qualifying loan, the interest on the refinanced portion typically remains eligible for the deduction.
A qualifying vehicle generally must:
Vehicles that cannot qualify include:
The full $10,000 deduction is available for taxpayers whose modified adjusted gross income (MAGI) falls below certain thresholds. Above those limits, the deduction is reduced and eventually eliminated.
Single: Full Deduction Threshold- $100,000, Phase-Out Range- $100,001–$149,000, No Deduction Above – $149,000+
Married Filing Jointly: Full Deduction Threshold-$200,000, Phase-Out Range – $200,001–$249,000, No Deduction – $249,000+
The phase-out typically reduces your available deduction gradually as income rises above the lower threshold.
Before claiming this deduction on your federal tax return:
Our team can also help you explore your financing options and find new vehicles that might qualify — ask us today!
Disclaimer: We are not tax professionals, please consult your tax advisor for further information.
