New Auto Loan Interest Deduction: Limited Opportunity for 2025–2028

For tax years 2025 through 2028, there’s a new tax break that could save you money if you finance a new vehicle for personal use. You can deduct up to $10,000 per year in interest paid on the new vehicle loan. This deduction is available whether you itemize or not.

Who Qualifies?

• Individuals who buy a new vehicle for personal use.
• The deduction phases out for taxpayers with modified adjusted gross income over $100,000 for single filers or $200,000 for joint filers.

What Vehicles Count?

• Only new vehicles; the vehicle’s first use begins with you.
• Must be a car, minivan, van, SUV, pick-up truck, or motorcycle.
• Must weigh less than 14,000 pounds.
• Final assembly must be in the United States. Determine here: VIN Decoder

Loan and Documentation Rules

• The loan must be taken out after December 31, 2024.
• The loan must be secured by a first lien on the vehicle.
• You must report the Vehicle Identification Number (VIN) on your tax return.
• The lender will send you a 1098 statement showing the interest you paid.

What Doesn’t Qualify?

• Used vehicles
• Vehicles for business or commercial use.
• Loans from family members or related parties.
• Vehicles with a salvage title or those used in a fleet.
• Any lease financing.
• Vehicles that you purchased before 2025 and refinanced in 2025.

Summary

If you’re planning to buy a new car, truck, or motorcycle for personal use, this new deduction could help lower your tax bill. Make sure your vehicle and loan meet the requirements, keep your records, and don’t forget to report the VIN on your tax return.

If you have questions about how this deduction could work for you, let’s talk before you buy your next vehicle!

Contact us to learn more

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