The “big, beautiful bill” signed into law last week includes a tax deduction of up to $10,000 for interest paid on car loans of qualified vehicles. To qualify, the vehicle must weigh less than 14,000 pounds, have at least two wheels, and be purchased new between 2025 and 2028.
The loan on the vehicle must also be standard and secured, with the final assembly taking place in the US. Consumers can verify their vehicle’s eligibility through dealer-provided documentation or certifications. The IRS is expected to create a resource listing qualifying vehicles and models.
The deduction applies to personal use only, not business or commercial purposes, and does not need to be itemized on tax returns. However, there is an income cap: for single filers earning over $100,000, and joint filers earning over $200,000, the deduction is reduced by $200 for every $1,000 over that limit.
The requirement for final assembly in the US may benefit American manufacturing and jobs, but could disadvantage lower-income buyers who often opt for used or imported cars.
Source: https://www.foxbusiness.com/retail/big-beautiful-bill-includes-car-loan-interest-tax-deduction-do-you-qualify