A major tax change just hit the road. Under the recently passed “One Big Beautiful Bill,” car buyers may be able to deduct up to $10,000 per year in interest on qualifying auto loans—no itemizing required. This new benefit runs from 2025 through 2028 and applies only to new, U.S.-assembled vehicles for personal use.
But not everyone will qualify.
- Income limits: Phases out for individuals earning over $100,000 and couples over $200,000.
- Vehicle restrictions: Cars, SUVs, pickups, motorcycles under 14,000 pounds qualify; used cars, imports, ATVs, trailers, and campers don’t.
- Assembly requirement: The car’s “final assembly” must take place in the U.S., confirmed on the vehicle’s info label or VIN.
Why it matters: With average new car prices around $48,000 and loan interest rates near 8.64%, buyers often pay nearly $200 per month in interest. This deduction could help—but its reach is limited. Critics point out that higher earners and those buying pricier new vehicles will benefit most, while many lower-income buyers or those preferring imports won’t qualify.
Electric vehicles may qualify if U.S.-assembled, but the OBBB also eliminates the existing federal EV tax credit for most buyers after September 30, 2025. Combined with new 25% tariffs on imported vehicles and parts, prices could rise further—even for eligible U.S.-assembled cars.
Bottom line: Even with this tax break, the best car-buying decisions come from careful budgeting, loan shopping, and long-term cost planning.
If you’re weighing whether this deduction could work in your favor, Verity CPAs can help you crunch the numbers and plan smart. Contact us at info@verity.cpa or 808.546.5026.