Updated: July 18, 2025

Car shoppers now have a new reason to finance their next purchase. A recently passed tax law – part of the One Big Beautiful Bill – introduces an Auto Loan Interest Deduction that could save buyers thousands over the next few years.

🚗 Key Points About the Deduction

• Effective Dates: Applies to new vehicles purchased on or after January 1, 2025. Claimable on tax years 2025 through 2028. The bill was signed into law on July 4, 2025.
• Deduction Limit: Deduct up to $10,000 per year in interest on qualifying auto loans.
• Eligible Vehicles: Must be new, assembled in the U.S., and under 14,000 lb (cars, SUVs, pickups, vans, motorcycles). Used, leased, or commercial vehicles do not qualify.
• Income Phase‑Outs: Full deduction available for single filers with income ≤ $100,000 and joint filers ≤ $200,000. Phase‑out begins beyond those limits.
• Above‑the‑Line Deduction: You don’t have to itemize to claim it—this reduces your taxable income directly.
• Loan Requirements: Applies to standard secured auto loans; VIN must be reported on your tax return.

💡 What This Means for You

• If you plan to buy a new U.S.-assembled vehicle, financing could now bring extra tax savings.
• Check the vehicle’s assembly location with your dealer or manufacturer to ensure eligibility.
• Consider your income bracket—phase‑outs may reduce or eliminate the deduction for high earners.
• This benefit applies through the end of 2028, so you have time to plan your purchase.

✅ U.S.-Assembled Models That Qualify

📅 Effective Dates at a Glance

🔎 Learn More

For deeper details, see these references:

• AP News – Auto Loan Interest Deduction Overview
• CBS News – How the Deduction Works
• Kiplinger – Tax Planning Tips