If you took out a car loan in 2025, you could be eligible for a new tax break under the One Big Beautiful Bill (OBBB).
Under Section 70203 of the OBBB, individuals can claim a new “above the line” deduction for interest paid on qualified personal auto loans. This means that you can still claim this deduction and save on taxes even if you choose the standard deduction.
Effectivity, Deduction Cap, and Income Phase Out
This deduction is available for qualified vehicle loans that originated from tax years 2025 through 2028. Qualified individuals may be able to deduct up to $10,000 of interest paid on that loan in a tax year. However, this deduction begins to phase out for taxpayers with modified adjusted gross income over $100,000 ($200,000 for joint filers).
Eligibility Requirements
- Qualified Vehicles
- A car, minivan, van, SUV, pick-up truck, or motorcycle.
- It must have a gross vehicle weight rating of less than 14,000 pounds.
- It must be a brand-new vehicle.
- The vehicle must be for personal use (not for business or commercial purposes).
- Final assembly of the vehicle has taken place in the United States.
- Qualified Loans
- The loan must originate after December 31, 2024.
- Secured by a lien on the qualified vehicle.
- Interest paid on a refinanced qualified loan may also qualify.
Reporting Requirements
The taxpayer must include the vehicle identification number (VIN) of the vehicle on the tax return when they claim this deduction.
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