Thanks to recent guidance from the Treasury & IRS under the One, Big, Beautiful Bill, there’s a brand-new tax benefit that many car buyers can take advantage of when filing their 2025 tax return (due in 2026)!
Here’s how it works:
✨ What’s deductible?
Interest you pay on a qualified auto loan used to purchase a new vehicle for personal use can now be tax deductible.
📌 Key points:
✔️ You can deduct up to $10,000 per year of interest paid on eligible car loans.
✔️ The vehicle must be new (original use with you) and for personal use — not business or commercial vehicles.
✔️ The loan must have been incurred after Dec. 31, 2024.
✔️ You do not have to itemize your deductions to claim this — it works with the standard deduction too!
📉 Income limits apply:
This deduction begins to phase out once your modified adjusted gross income (MAGI) exceeds certain thresholds (e.g., $100,000 for single filers, $200,000 for joint filers).
📋 Reporting & claiming:
The IRS and lenders will be working together under new guidance so taxpayers get the information they need to claim this on their returns — including reporting details from lenders to help you substantiate the deduction.
💡 Bottom Line: If you took out a car loan for a new personal vehicle in 2025 — you might be able to reduce your taxable income by up to $10,000 thanks to this new deduction! Talk to your tax professional to see how it applies to your situation.
Want help figuring this out and maximizing your tax benefits? We’ve got your back! 🙌
