The One Big Beautiful Bill Act (OBBBA) was passed on July 4, 2025, enacting a large set of federal taxation changes. Darnall, Sikes & Frederick would like to provide clarity on a number of the new provisions so that individuals like yourself are informed on how to take advantage of additional tax savings in the coming years. One of those opportunities is through the “No Tax on Car Loan Interest” provision.
Section 70203 of the OBBBA outlines a temporary provision which allows individuals to deduct interest paid on loans for the purchase of certain qualifying personal-use vehicles. Individual taxpayers may receive a maximum deduction of $10,000 annually on their 2025 – 2028 tax returns. This deduction may be taken whether you itemize or take the standard deduction. The deduction is subject to a phase out for single taxpayers with a modified adjusted gross income (MAGI) over $100,000, or married taxpayers filing a joint return with a MAGI over $200,000 (Source: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions).
Qualifications for the deduction must be met for both the vehicle that was purchased and the loan on which interest is being paid. The vehicle must be a “car, minivan, SUV, pick-up truck, or motorcycle with a gross vehicle weight rating of less than 14,000 pounds”. The vehicle must also have had final assembly in the United States, determinable using the vehicle identification number (VIN). The loan must have been taken after December 31, 2024 to finance a new (not used) personal-use vehicle. The loan must also be secured by a lien on the vehicle (Source: https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions).
Using these qualifications, review your eligibility for this deduction; consult with your financial and/or tax advisors to make them aware of your eligibility; and provide your tax preparer with interest statements furnished by your lender so that it may be reported properly on your tax return.
If you, your children, or your loved ones have recently purchased or are considering purchasing a new vehicle in the coming years, consider taking advantage of this new provision. Thank you for putting your trust in Darnall, Sikes & Frederick to keep you informed and assist in your tax planning. Please do not hesitate to reach out to us for any further guidance.
Reference:
Internal Revenue Service. (2025). One, Big, Beautiful Bill provisions. Retrieved from https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions