Home Automobiles Who Qualifies For The New Auto Loan Interest Deduction?

Who Qualifies For The New Auto Loan Interest Deduction?

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Written by Brittany Howard – Edited by Kellye Guinan
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* The new tax deduction allows some borrowers to deduct up to $10,000 in auto loan interest after purchasing a qualifying vehicle.
* To qualify, vehicles must be new, purchased for personal use and have been assembled in the U.S. to qualify.
* Unless you finance an expensive vehicle, your savings from this tax deduction will likely amount to a few hundred dollars.
* Focus on securing a good interest rate and purchasing an affordable car rather than qualifying for modest savings from this tax deduction.

A new federal tax law lets you deduct car loan interest — but the actual savings may leave many drivers disappointed. The deduction is part of the Trump administration’s One Big Beautiful Bill, and a continuation of President Trump’s efforts to encourage Americans to buy American-made goods.

While any relief is welcome in an auto market with high vehicle prices, high interest rates and inflation, this deduction will not apply to many vehicles currently on dealer lots — even some sold under American brands. Those consumers who do qualify may be surprised by how little the deduction actually saves them.

How to qualify for the car loan tax deduction

The new tax benefit on car loan interest allows you to write off up to $10,000 a year in interest paid on an auto loan for a qualifying vehicle. You can claim the deduction whether you use the standard tax deduction or itemize, but only for purchases made from the beginning of 2025 through the end of 2028.

To qualify, you must use a secured auto loan to purchase an eligible vehicle for personal use. Eligible vehicles include most classes of vehicles under 14,000 pounds, including cars, minivans, vans, SUVs, pickup trucks and motorcycles. Recreational and larger vehicles such as ATVs, trailers, campers and RVs do not qualify.

Faith Based Events

Importantly, whichever vehicle you purchase must undergo final assembly in the United States. You will need to include your car’s VIN on your tax return each year that you claim the deduction.

Check the final assembly point before you buy
You can confirm a vehicle’s location of final assembly using labels attached to the car at the dealership or by using the vehicle identification number (VIN) and the National Highway Traffic Safety Administration (NHTSA)’s VIN Decoder.

The maximum annual deduction is $10,000 for taxpayers with a modified adjusted gross income (MAGI) of up to $100,000 ($200,000 for joint filers). The deduction phases out for taxpayers over that threshold.

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