July 4, 2025 – “No Tax on Car Loan Interest” Deduction Under OBBBA (2025-2028)

Matthew Cuplin |
Categories
Education
Tax Planning

A provision in the One Big Beautiful Bill Act (OBBBA) creates a temporary tax deduction for certain vehicle loan interest starting in 2025. It allows eligible taxpayers to deduct interest paid on a car loan for personal use, which can lower taxable income. This deduction is currently available for tax years 2025 through 2028.

Overview of the Deduction

  • Applies to tax years 2025 through 2028
  • Allows a deduction for interest paid on a loan used to buy a personal-use vehicle
  • Lease payments do NOT qualify
  • Maximum annual deduction: $10,000 per return

Qualified Vehicles

  • Must be a car, SUV, pickup truck, van, minivan, or motorcycle
  • Must have a gross vehicle weight rating under 14,000 points
  • Must be finally assembled in the United States
    • You can confirm where the vehicle was assembled using the VIN, dealership label, or the NHTSA VIN lookup tool.

Income Phase-Out

  • Phase-out begins at: 
    • $100,000 (Single / HOH)
    • $200,000 (Married Filing Jointly)
  • The deduction is gradually reduced and may be fully eliminated at higher income levels

Who Qualifies

  • Available whether the taxpayer takes the standard deduction or itemizes
  • Must have a qualified vehicle loan (post-2024, secured by the vehicle, personal use)

The deduction is claimed by filing Schedule 1-A with your regular 1040 tax return.

Click here for additional details: OBBBA: No Tax on Car Loan Interest